Does it make sense to offer foodservice employees daily pay?

Question:

Except for cash tips, which employees split after each shift, I do payroll biweekly like most restaurants. Employees are asking me about other places that pay daily. Is this becoming a thing?
– Owner

Answer:

In this tight labor market, with low overall unemployment and a high number of vacant positions in hospitality, you may find that you are competing not only against other restaurants for talent, but also other types of jobs entirely, ranging from office work to delivery apps.

A lot of jobs in the so-called gig economy, such as driving for a ride-share or delivery company, pay daily or even per transaction. Unless an employee has a true passion for hospitality, they may be lured to the instant gratification of gig work. Why wait for payday?

Many payroll companies are now offering the opportunity to pay employees daily, a practice called early wage access or earned wage access, to help employers provide a similar benefit to companies that offer daily pay. There are various scenarios for how this may be done. Often, employees pay a fee as a percentage of their wages or a per-transaction fee to access their daily wages, raising further equity concerns.

Attorneys Patrick Dalin and Nan Sato of Fisher Phillips are experts on this topic.

They say: “Some employers have found that offering employees early access to their wages can be a valuable tool for employee satisfaction and employee retention. Some employees like the benefit of having more frequent access to their wages than what is traditionally offered, [as] it can help them pay bills or expenses that are due before their next payday. There are, broadly speaking, two possible ways for an employer to offer their employees access to their wages on a less than weekly or biweekly basis. The first is to offer an Early Wage Access program in which a third-party vendor provides to employees, upon their request, an advance on their earned wages. There are often caps on the amount that an employee can request, and the advances can be received the same day or within a day or two. The vendors charge fees in a number of ways, including subscription charges to employees who sign up, charging a fee per transaction to employees and/or employers, and requests for tips from users. 

“Another option is that there are now payroll vendors who offer the payment of wages on a daily basis. Whether a daily payroll system works for your company could depend on how complicated your payroll is, and whether your timekeeping methods are sufficiently automated and computerized. With the power of modern computer systems, it’s now possible to pay employees more frequently than on the traditional workweek basis. However, because wage and hour laws compute overtime on a workweek basis, the payment of daily payroll can be complicated for some employees when it comes to computing the regular rate and overtime, as well as computing appropriate deductions. Interested employers will want to see if their current payroll vendor can compute daily payroll, but should also explore and compare the technical capabilities and fee structures of other vendors before making a decision.”    

Earned wage access isn’t right for every operation. My advice is that in this competitive labor market, talk to your employees about what you can do to better attract and retain them. If this solution is appealing to current and prospective employees, it is worth exploring.

As always, this column is not legal advice. Check with your attorney, accountant and payroll vendor to make sure you are in compliance. More on retention and benefits here.