Some restaurants, mostly national fast-food chains, are making instant payments available to employees as a new option to receive their wages.
Where previous payment methods like checks and automatic deposits can take up to two weeks on average to fully disperse a lump sum to workers’ accounts, instant payments allow workers to withdraw a portion of their regular pay within the same day that employers add the funds to employee accounts. Large restaurant chains such as McDonald’s, Pizza Hut, Outback Steakhouse and Noodles & Co. have all added instant payments to their employee benefit packages.
This trend is relatively new and while some restaurants suggest instant payments have improved employee retention, and attract more new hires with updated benefit packages, the true impact of earlier access to wages is still up for debate among the restaurant management industry.
Let’s consider how instant payments actually work.
A popular product, DailyPay, requires that interested employees complete an employer-provided form and download a mobile app. Employers enter and convert worked hours in a pay-period to an available balance, DailyPay funds the payment, then employees can withdraw the money. Employers have the freedom to choose the percentage of wages employees are able to request.
A fee is charged for each funds request. DailyPay fees range from $1.25 for next-day availability up to $2.99 for instant access. The fee may be paid by the employer, the employee or a combination of the two. After the requested funds have been released, DailyPay is repaid via the regular payroll process.
Why are instant payments not common practice?
Restaurant owners and payroll professionals are still skeptical of instant pay programs because extra pay requirements such as overtime and tipped wages still need to be met, but often don’t fit instant payment structures. Another concern is meeting extensive wage-deduction laws. Garnishments, insurance, child support, and other circumstances all must be accounted for. DailyPay states that all deductions are considered and 100 percent of the employee’s final net pay will be available to them.
Another is deciding who pays the fees on instant payments. Should it be required of employers to pay or left up to employees? There is no standard practice and the IRS has not offered any guidance on the issue yet.
Should you add instant payment options to your payroll?
You’ll need to carefully evaluate your current payroll process to make the choice. Before adding instant payment options, you should make sure your restaurant is issuing pay stubs correctly and that all wages can be properly accounted for to avoid any potential legal claims to unpaid or untimely paid wages. Furthermore, you’ll need to know that instant payments fit how your employees are using their money and that the system will actually benefit them.
Some of the restaurants that have adopted instant payments did so because employees wanted options that helped them save money more easily and be able to access money quicker when something important comes along. A broken-down car, child-care payment, or school payment can make it difficult for employees to get to work. Instant payments can relieve some of those issues by letting employees get cash quicker to fix the car, pay the daycare, or not have to take out a school loan.