Get ready for the flexible pay future of payroll
The future of employee payments is expected to be much more immediate and flexible, but what do employers need to know? ReadyTech sat down with Aussiepay and ePayroll general manager, Daniel Wyner, to find out what the brave new world of on-demand employee payments means for you.
‘Flexible pay’ sounds great, but what is it exactly?
Flexible pay – also known as same day pay – is the concept of getting access to your salary, your earnings, the money you are entitled to, when you need it. Instead of waiting for a pay run that is either weekly, fortnightly, or monthly, it’s saying I need to get access to that today.
So, if I’m a shift worker or I’m a casual worker, and I’ve clocked in and clocked out, and my manager has approved that I’ve done my job, why do I need to wait until my next pay day? I should be able to cash out now and get access to those funds when I need it.
That sounds like a big change to the way payroll works.
I don’t know that the way we are going to pay employees is going to change – it’s just giving them access to that pay earlier.
As an employer, I shouldn’t have to change whether I pay my employees weekly, monthly, or fortnightly. The whole concept of doing pay on a certain run is that, from an administration perspective, it’s easy to make sure that I can manage that process.
Flexible pay is about divorcing the fact that my employer does a pay run on a certain day from getting access to that money. So the whole idea should not actually affect the employer, it should just give me as an employee more access to the funds I’m entitled to when I need it.
Why is it necessary? Is anyone demanding this change?
This is such a new concept that no one is demanding it just yet. But if you think about the workforce, it is getting younger and younger. With Gen Y and Gen Z now coming into the workforce, they are almost trained for that immediacy based on the use of mobile technology.
For example, I was recently at the football and there was someone talking about their upcoming shift, and they pulled out their mobile phone to talk about when they were going to work.
It’s that type of worker that’s going to be saying, ‘Hey I’m working on this date but I also want to be able to go to a certain concert, and I have got a phone bill that I just don’t have the money to pay for just yet, so let me get access to a portion of my salary, and I’m entitled to get access to that now.”
Will there actually be advantages for employers?
Again, you have to consider the change in the type of employees out there. With Millenials and Gen Z coming into work, what’s going to retain them as employees?
I could walk down the road and get another job and earn $5000 dollars more. But if they’re not offering this as an employee benefit, then I am really going to think twice about leaving this organisation for another one, because I won’t get the same flexibility and I have to wait.
That value of that immediacy and the value of that flexibility is going to be far more for these workers than just a couple of extra dollars in my back pocket by the end of the year.
Which industries will get the most out of flexible pay?
It’s less about the type of industry and more about the type of employer you are. If you have a lot of shift and roster-based employees – people that clock in and clock out on time and attendance software solutions – then there is proof of when you started and proof of when you finished. Where it’s been authorised by your manager and there is trust in place it’s going to be easier to roll out.
It’s going to be a bit harder when you have salary-based employees, but there can be the right systems and processes in place; for example, you might only allow people to cash out 50 per cent of their salary or something like that to ensure there is the right management around it.
Is the outsourced payroll industry leading the way on this?
The payroll managed services industry needs to challenge itself to not just do things the same way they’ve always been done. As an industry, payroll hasn’t really changed much for decades. We’ve automated elements to make it easier, but that’s it. For example, we still have fixed pay day pay runs.
We’ve got to start thinking about things a little more differently and challenge ourselves a little bit more. With the advent of some of the big changes going on – the most significant one being Single Touch Payroll or STP, which is the single biggest change to the tax system since the GST was rolled out in Australia – we need to ask how are we truly adding value to our client organisations.
Do future-focused employers need to start adapting now?
The New Payments Platform will bring in a whole new way that transactions can be immediately enacted. My money will go from my account to your account straight away, and that instantaneous aspect will make life a lot easier. But the administration of that is going to be difficult.
That’s why you need the payroll providers to be able to come on board and offer this functionality. If I can log into my employee self-service portal or kiosk and, in the same place I historically apply for leave or get payment summaries, I can go in there and say I need to get access to my funds before the next pay day, and that’s enabled within the platform, then that will change the game.
Will Aussiepay and ePayroll offer flexible pay?
We’re investigating how we can help roll out these type of functionalities at Aussiepay, our managed services offering, and at eParyoll, our do-it-yourself payroll platform in the cloud.
For us it comes down to making sure we can transact the right way and not slow employers down. The last thing we want to do is say this is available but it’s going to be an enormous administrative burden. We’ve asked our clients if they are interested in this, and they are throwing their hands up and saying, ‘Hey, no chance if it’s going to be an administrative burden on us’.
We have to make it as seamless as possible, and you really only get one chance at it. So we’re going to do it properly. We’re going to engage with our clients to make sure that user experience is right, and that it helps them keep and retain their staff, because otherwise we won’t have a future either.
If you had a crystal ball, would the future of payroll be flexible?
I would say in the future we’ve got to have flexibility, because we’ll need to apply flexibility in the way we work to every aspect of our lives. We are immediately transferring data through a range of new technologies nowadays, and to not enable that in the way I access the earnings I’m entitled to, doesn’t quite move us to the future of work, and that’s where we need to be.