For many U.S. workers, meeting daily financial needs, let alone long-term spending goals, can be a struggle.
A frequently cited 2017 report from recruiting firm CareerBuilder showed 78% of U.S. workers live paycheck to paycheck to make ends meet. But even those with higher annual earnings aren't necessarily exempt: 28% of workers making between $50,000 and $99,000 per year said they "usually or always" live paycheck to paycheck, and the same was true for 9% of respondents in the survey with incomes of $100,000 per year or more.
This also shows up when analyzing an employee's ability to do long-term financial planning. A separate 2017 survey by advisory firm Willis Towers Watson found that more than one-third (37%) of U.S. workers could not quickly gather $2,000 in the event of an emergency.
"It's not just a fringe part of working America," Alan Glickstein, managing director, retirement, at Willis Towers Watson, told HR Dive in an interview. The problem affects workers even at the largest companies, he said, and may lead them to seek out other options to access funds outside their typical pay period, including high-interest payday loans.
But such options can leave workers in even deeper debt, piling on to existing financial difficulties. That has some employers, from global chains to local businesses, looking for tools, apps and other strategies to provide support.
A problem employers created?
Central to the issue of employee pay is the concept of the biweekly pay period. The practice has an uncertain origin, according to Safwan Shah, founder and CEO of employee finance platform PayActiv. "I don't think you get a straight answer from anyone," Shah said in an interview with HR Dive.
A cursory web search offers a few ideas. A 2017 report by CNN found the gap had to do with sluggish business processes, from bank transactions to the internal approval systems some employers used. An explainer from The Houston Chronicle points to the fact that biweekly pay practices can save on certain costs like supplier fees. Shah said the practice also has roots in the IRS' tax collection procedures.
History aside, Shah believes employers should care about the problem posed by payday lending and related practices in part because it's their fault. "Employers are responsible for creating the problem in the first place," he said.
"What we don't talk about but want to talk about creates stress."
Founder and CEO, PayActiv
Financial difficulties affect workers in other ways, Glickstein said, from increases in health-related claims and absenteeism to lost productivity. "It's more than just the pressure of not having money right now."
Enter solutions like PayActiv, which specializes in what Shah called "earned wage access." Workers pay a flat fee to buy a membership for a given pay period that allows them to access a portion of the pay they've earned during that pay period as well as a host of other services, including a bill pay function, savings function and discounts.
Even, a platform adopted by Walmart, allows workers to look at their schedules and determine how much they'll earn. It also offers "Instapay," a subscription-based option that allows workers to use up to 50% of what they've already earned during a given month for immediate financial needs. Even uses PayActiv's technology to deliver Instapay.
And still, there are other small-scale solutions used by employers, like working with a local credit union to provide workers short-term loans with more manageable interest rates.
"Financial well-being feels very difficult because people never teach it," Jon Schlossberg, Even's CEO, told HR Dive in an interview. Even seeks to help workers plan out their budgets by determining how much money they'll be working with — on top of giving them options for saving.
Solving for behaviors
Getting workers early access to their wages isn't exactly a cure-all though, according to Glickstein, who noted that even those who follow a budget tend to make financial decisions in the moment. Employers, he said, have to contend with underlying behaviors.
"Giving [employees] access to that money three days earlier isn’t solving the problem," Glickstein said. "It's kind of a Band-Aid, if you will." Finding a way to connect with people in the moment — and more importantly, finding something that drives repeated engagement over time — may be a better way of getting to the bottom of financial problems. "There are so many programs employers provide," he said, "but one thing they have in common is that they are hardly ever used."
For what it's worth, neither Schlossberg nor Shah disagree that solutions need to focus on behaviors. Both of their platforms provide access to planning and education that can help employees navigate this space.
Schlossberg, who said he's a behavioral psychologist by training, explained that Even's daily engagement rates are part of the sales case it pitches to clients. "You can't be fit if you don't go to the gym everyday."
But it's important also not to shame employees, no matter the solution an employer adopts, Glickstein said. Instead, he recommended employers focus on personalized education that can connect with the way workers actually make decisions.
The privacy problem
Another thing to consider: personal finance is a very personal and private subject for workers, and many may be skeptical about employers' efforts.
"When we talk to employees, it's interesting. On one hand, they want employers to help," Glickstein said. "On the other hand, people are very nervous about sharing personal information with their employer. They don't want to signal that they have a problem."
That sentiment also can make it more difficult to create effective solutions, Glickstein noted, as it's important to have a full picture of an employee's finances in mind.
But stigma around discussing pay, while not uncommon, may be a sign of a cultural problem in and of itself, Shah said. "What we don't talk about but want to talk about creates stress." That's part of what he emphasizes to employers: "Once you offer this service, it creates a ventilation in your culture."
Schlossberg said Even has a built-in "member bill of rights" which includes a provision that it won't share employees' data, and won't do anything with their personal information, "unless we give you something in return."
Making use of testimonials, as with other areas of benefits, is one way to ease employees' fears about payroll changes, Glickstein said. He recalled an experience with one client in which employees shared blog posts about a solution offered by their employer. "That's the communication that is much more likely to get people's attention."
Sitting 'on the same side of the table'
HR departments, too, may have fears about making any sort of change to the way they compensate workers.
One of PayActiv's first challenges was working with employers' time and attendance systems, Shah said. Since then, the company's done a lot of heavy lifting to build templates that work with existing formats and vendors.
"There was a sea change that came in the industry in the last couple of years," Shah said of the HR field's general approach to tech adoption. "Now, when you have a conversation with HR, they're on the same side of the table."
Overall, employers need to understand that there is a role for them to play in the conversation around employee's short-term financial needs, Glickstein said. He said it's easier to get leadership to buy into solutions by looking at specific data points over others.
Decisionmakers might be scared away by the number of U.S. workers living paycheck to paycheck, for example, which may frame the issue as being too big for any one employer to solve. But if HR shifts the lens to focus on workers being unable to find $2,000 for an emergency situation, "the problem isn't as intractable as it may seem," he said. "There are some things you can do with a real return."