I Led an RFP for an On-Demand Pay Vendor. Here’s What I Learned.

By Barbie Winterbottom

The popularity of on-demand pay has risen so sharply that sometimes it feels like it exploded overnight. Giving employees access to their earned but unpaid pay has really gone from being a “nice to have” to a true necessity these past few months. And as many businesses across the country begin to reopen their doors, they are looking to cut costs, enhance employee safety and attract job hires. Whew! Tumultuous times, indeed.

There are a number of benefits to on-demand pay programs, with some of the main ones being: 

  1. On-demand pay boosts hiring and serves as a competitive differentiator for your company
  2. On-demand pay reduces cash handling
  3. On-demand pay helps businesses improve retention and boost worker productivity, all for zero cost to the employer

But to really maximize these benefits, it’s important to select the right on-demand pay vendor for your company. Given the nascency of the market, there are a plethora of models out there, and it seems like there is a new vendor popping up every other week. It can feel overwhelming trying to make the right choice. 

To make things easier, I wanted to share my experience leading an RFP process.
I walked away with ten key questions that other HR or payroll professionals should keep in mind when choosing a provider:

  1. What if employees have questions on how it works? Do they contact you?
    In the absence of call center support (or failing to effectively market the existence of the call center), the burden of support will fall upon your payroll team. Be sure to choose a vendor with live, multi-level call center support with 100% U.S.-based dedicated agents.
  2. Does the vendor’s technology account  for the approval of employee requests for funds or will your team be approving hours or funding requests? If a solution relies upon your existing payroll infrastructure to approve hours or employee requests for funds: (a) The administrative hassle of approval will fall to your team or (b) You may introduce risk of employee bias or discrimination by assuming responsibility for the order and timely response of fulfilling the request.
  3. Is the technology compatible with any payroll/TMS setup? Can we change our tech stack at any time without your employees losing access to on-demand pay? Implementing and rolling out an on-demand pay program is no easy feat. If you work with a payroll provider who’s ODP program is only compatible with their software, you run the risk of losing your on-demand pay program should you wish to change payroll systems in the future.
  4. Who handles paycheck reconciliation? 
    If the vendor doesn’t handle paycheck reconciliation, your payroll team will be required to process a wage deduction to reconcile the paycheck. This introduces unnecessary hassle and risk for your team.
  5. How long does it take employees who enroll in the program to get access to their funds?
    Immediate accessibility upon enrollment helps drive program adoption, which ultimately maximizes your ROI.
    If employees have to wait until the following pay period to access funds or wait for the delivery of a program pay card, adoption rates could be negatively impacted.

  6. Where can employees send their pay? Are there different fees for sending funds to varying destination accounts?
    It’s 2020. Employees expect choice and flexibility. Limiting them to one destination account (e.g., program debit card, paycard) or charging exorbitant fees to send funds to their personal bank account create confusion at best and frustration at worst.
  7. Are there limits on how much pay an employee can transfer prior to payday?
    The fundamental goal of on-demand pay is to help employees achieve financial stability. If employees have an emergency, they deserve the ability to access up to 100% of their already earned pay. It’s their money- they worked for it. They should be able to use it in the event of emergency to avoid predatory payday loans or overdraft charges.
  8. Does the program offer savings tools? Are they free?
    While many vendors offer savings and budgeting tools, it’s important to ensure they are free. There are a plethora of free D2C savings and budgeting tools available for employees to use. If you want them to leverage tools offered by your vendor, they should be free or else you risk lower program adoption rates.
  9. Who funds the pay advances?  If the employer is funding, when are withholding taxes due?
    To minimize regulatory risk and increased workloads, choose a vendor that funds 100% of the advances. If the employer funds the program, there are tax withholding obligations that you should consider. If the vendor acts as a commercial lender, the on-demand pay program may require amendments to existing loan agreements.
  10. Do you provide marketing collateral at no cost, such as posters, flyers, cards, etc.?
    An on-demand pay program is only successful if your employees know about it. If you don’t want to do the heavy lifting when it comes to program awareness, choose a vendor who can offer you a free, agency-grade rollout plan with the customized marketing materials to promote it.

While every organization is different, there are a few themes that are more universal: payroll and HR teams are busy, introducing compliance risk is a no-go, and your employees want a simple and transparent way to access their own pay. On-demand pay has so many benefits, but in order to make the most of them, be sure to choose a vendor that provides a full-service experience to you and your employees.

Barbie Winterbottom
CEO
The Business of HR
[email protected]