Workers are calling the shots in an ever-tightening labor market. So why should they wait a week or two before they see their paychecks?
A small but growing number of U.S. workers can draw from their earnings daily instead of on a more traditional weekly, biweekly or monthly basis under a new service offered by a startup called Instant Financial.
The service lets the employees tap half the pay they earn on a given day as soon as their shifts end. The offering is chiefly being targeted to hourly workers, many of whom live paycheck to paycheck and sometimes seek small advances such as payday loans to get by.
“It’s putting everybody in control of their pay,” says Steven Barha, CEO of Instant Financial. “It’s having a little bit of money when you need it.”
Here’s how it works: Workers are notified, typically on their smartphones, at the end of their shifts that they have an hour to tap half their pay and are asked if they wish to do so. The money is instantly downloaded onto their debit cards. No taxes are deducted until employees receive their paychecks. And there’s no fee for workers, though businesses pay Instant Financial $1 per active user each month.
Limiting the money available to 50% of their paychecks encourages saving. And the one-hour window to draw the money discourages impulse purchases later in the day.
About 150,000 employees of 50 companies have access to the service, which was rolled out early this year. Most of the firms are restaurant and hotel companies with lots of hourly workers, including franchisees of McDonald’s, Outback Steakhouse and Dunkin’ Donuts, as well as some retailers, trucking companies and staffing firms, Barha says.
