Medical Business Advisory / On-Demand Pay: A Growing Payroll Trend

On-Demand Pay: A Growing Payroll Trend

A 2020 report by Ernst & Young says on-demand pay is “the term used to describe a category of financial products that give employees the ability to draw on their accrued wages before payday.” 

The Case for On-Demand Pay

In 2017, CareerBuilder reported that a staggering 78% of U.S. workers live paycheck to paycheck. Since then, surveys from other sources have shown a decline in that number.

According to the 2019 “Getting Paid in America” survey, 74% of U.S. workers live paycheck to paycheck; in the 2020 survey, that figure dropped to 69%. And a 2020 survey by Highland Solutions found that 63% of U.S. workers have been living paycheck to paycheck since the COVID-19 pandemic started.

Despite the declining numbers, a significant portion of U.S. workers are experiencing financial stress. According to the Ernst & Young report, 70% of people in the U.S. and U.K. experience financial stress regularly, and half of them “have faced a financial shortfall between pay periods and encounter this issue approximately every four months.”

As Ernst & Young states, financial stress causes distractions, reduced productivity, absenteeism and employee turnover in the workplace. Notably, financial stress accounts for 20% of employee turnover, resulting in an estimated $300 billion in annual costs to U.S. and U.K. employers.

Ernst & Young asserts that financial stress arises from three main sources:

  • Emergencies.
  • Insufficient savings.
  • Disconnect between the timing of income and expenses.

To support employee financial well-being, employers are turning to on-demand pay. 

On-Demand Pay Program Types

As stated, on-demand pay allows employees to access accrued wages prior to payday, meaning wages already earned but not yet paid. Employers can usually limit the amount and frequency of early wages withdrawn.

Employers that perform payroll in-house can offer on-demand pay by using payroll technology that integrates with the on-demand pay application.

Alternatively, employers can go through a third-party vendor that provides on-demand pay services or a payroll provider that includes on-demand pay in its services. Utilizing a third party is key to lowering many of the responsibilities that come with designing, implementing, administering and maintaining an on-demand pay program.

But before you adopt the program, be sure to consider all factors, including your legal obligations, any fees your employees will be responsible for and how to help your employees properly use the program. 

Growth Outlook for On-Demand Pay

In the 2020 “Getting Paid in America” survey, nearly 28% of respondents said they are already using on-demand pay or want access to it.

According to a 2019 SHRM article, 5% of large companies with mostly hourly workers currently provide on-demand pay, and that number is forecast to jump 20% by 2023.

Last, and most striking, the Ernst & Young report says on-demand pay can reach levels of adoption similar to that of credit cards if its potential is fully realized.  

If you would like to discuss your payroll needs, please click here to contact a BlueStone representative.

©2021

Author: Trey Gailey, CPA

Trey Gailey is a founding member of Bluestone Services and serves as the firm’s Managing Director and Director of Accounting. He has deep experience providing accounting services across a wide swath of industries, including medical practices, distribution, and legal services. Trey has clients in the US and other areas of the world, garnering significant experience with international tax compliance to supplement his familiarity with domestic U.S. tax law.

When you work with Trey and the team at BlueStone, you can maintain confidence in your accounting. Our team provides complete, accurate and timely financial data and reports. Thanks to the efforts of a professional team and the technology we use daily, BlueStone’s can provide virtual or onsite outsourced accounting services based on your needs.

In his Managing Director role for the organization, Trey helps oversee the client experience for all service areas in BlueStone Services and focuses on the core operation offerings. Prior to helping develop and lead BlueStone, Trey officially joined its parent company, KatzAbosch in 2013. There he serves as a key shareholder.

Get in Touch:

Author Bio Form
Keep informed
Receive tips on how you can use outsourcing to save time and improve your business processes.

Related Articles

06/12/2025

Medical Business Advisory Case Study – Fractional Leadership

How we helped a mid-sized pediatric medical practice solidify its accounting framework, increase operational efficiency, and allow practitioners to

Read More  
06/11/2025

Your Medical Practice Deserves Affordable C-Suite Thinking – Why Fractional Leadership Is the Answer

When leadership gaps threaten performance, medical practices are turning to fractional management to gain strategic direction and stability, without

Read More  
04/21/2025

Is a Hybrid Outsourcing Practice Management Model Right for Your Practice?

In the evolving landscape of healthcare, practice management models are continuously adapting to meet the demands of efficiency, cost-effectiveness,

Read More