It might sound like an accounting nightmare, but automation is key.
PayPal announced that it will allow its workers access to their wages immediately when they’re earned, rather than waiting for a traditional payday, a move that could impact future 401k salary deferral and similar benefits for businesses overall.
Through a new partnership with Even, “the responsible on-demand pay platform,” it’s part of a major financial wellness initiative undertaken by the San Jose, Calif-based company.
All PayPal employees in the United States can now use Even to get paid early, automatically budget and grow their savings, and have full visibility into their earnings through an easy-to-use mobile app, PayPal said.
The company wants to increase the net disposable income (NDI) of its employees to 20 percent. Net disposable income is the financial amount left after paying taxes and necessary living expenses.
“Over the past year, we’ve made significant investments to strengthen the financial health of our workforce,” Dan Schulman, president and CEO of PayPal, said in a statement. “We’ve made substantial progress to increase the net disposable income of all our employees, and our work with Even will help drive further improvements. Together, we’ll help employees safely navigate cash flow challenges, stay on budget, build financial resilience, and reach long-term savings goals.”
PayPal launched its employee financial wellness initiative after conducting an assessment in 2018 that examined the financial wellness of its hourly and entry-level workers. The company found that despite market pay alignment, many employees were still struggling to pay their bills each month.
Last year, the company rolled out a comprehensive financial health program that included lowering the cost of healthcare benefits, making every employee a stockholder, raising wages, and offering new financial learning and counseling programs.
By the beginning of 2021, PayPal estimates that the minimum NDI among hourly and entry-level workers will be approximately 16 percent, up from as low as 4 percent in some locations.
“Dan Schulman and PayPal are ahead of the curve,” Jon Schlossberg, CEO of Even, added. “Dan is showing the country – and other CEOs – that investing in the financial health and resilience of your people isn’t just the right thing to do. It’s the right thing to do for business.”
PayPal plans to introduce equivalent early wage access services to its employees in other markets in early 2021.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.