Every two weeks, my stomach does this fun little flip for joy as my lungs exhale a sigh of relief.
Payday, baby.
I feel a renewed sense of hope and motivation and map out my next money moves.
Unfortunately, shortly thereafter, I start twiddling my thumbs as I wait for that next paycheck — the one that’s two weeks away.
But what if I didn’t have to wait two weeks for a paycheck? What if I could get paid for those eight hours I put in today — right now?
Imagine it: You flop on the couch after work, check your accounts and find a portion of your paycheck already deposited. A pat-on-the-back, you-worked-hard-today payment that’ll go toward dinner.
A daily paycheck? Is that our future?
Is a Pay-Per-Hour Paycheck Model Possible?
This question has marinated in my mind for a few months now — since I wrote about Earnin (formerly ActiveHours), a program that pays hourly employees for the work they’ve already done. Rather than waiting for that two-week paycheck, users can opt to get paid for, say, the eight hours they logged that day.
It’s like a payday loan — but without the devastating interest rates and fees.
Other financial-tech companies are following similar pay-as-you-work models, including FlexWage, which secured $3.5 million in funding in 2014.
Most recently — and perhaps most noteworthy — Walmart has implemented a new system through an app called Even that allows its employees to receive a portion of their wages for hours they’ve worked — before payday.
“Walmart said the new initiative is intended to help workers avoid costly payday loans and other debt traps, and reduce the stress that comes with financial hardship,” the New York Times reported Dec. 13.
Also consider the popularity of the gig economy, featuring platforms that’ll pay workers daily. Think about Uber and Lyft, for example. Drivers can cash out at the end of the night. Immediate money.
Rohit Talwar, CEO of Fast Future Publishing, says the pay-per-day model is also already happening in service industries — like restaurants, where servers and bartenders earn tips.
He makes a good point, too: It’s the same idea as contract work or freelance work — though that unfortunately doesn’t always result in a quick paycheck.
Beyond getting paid for the hours you’ve worked, “this could easily evolve to pay by the minute, as the technology is here to do that,” Talwar says.
Will this daily paycheck model catch on?
After all, Earnin makes a good point — that the traditional pay cycle was built during a time when everything was done manually. You know, before computers and stuff. And Talwar says the future is upon us.
Ditching a Two-Week Paycheck Would Change Our Lives
As previously mentioned, getting paid for the hours you’ve worked that day could really help alleviate some of those paycheck-to-paycheck woes.
It’d help prevent folks from having to take out crippling payday loans, which often spiral into cycles of high interest rates and fees and, ultimately, cause them to slide deeper into debt.
It’d also help avoid late fees and overdraft fees, which, again, might only deepen your debt. (Last year, banks made $4.6 billion off overdraft fees.)
But we also have to consider the downfalls of such a system — both in the workplace and in our bank accounts.
How a Daily (or Hourly) Paycheck Could Change the Workplace
With technology, the possibilities are really endless.
“Generally, as technology replaces humans, competition for jobs may increase, and we could see payment approaches more tied to performance and the productive time worked,” Talwar hypothesizes.
But is this fair?
Employers would probably like it.
“For employers where staff are out on the road (e.g. salespeople, drivers, maintenance staff), this would be a real boon, as they could start to pay differential rates for sitting in traffic versus doing the job,” Talwar says.
But from the employee perspective, Talwar says this system could promote reckless behavior.
“The downside is that it might encourage dangerous driving and speeding as workers try to minimize idle time,” he notes.
For those with desk jobs, it could mean getting paid full rates only for the time you’re at your desk or workstation. If you get up to take lunch or go on a quick refresher walk, you’d see reduced rates or perhaps no pay at all.
On the other hand, for those who are constantly working more hours than they’re paid to work, this could be good and fair, seeing as they’d get paid for everything they do — and every hour they work — rather than quietly sulking in unpaid overtime.
How a Daily Paycheck Could Change Personal Finance
First, tax season would become even more nightmarish. Talwar makes note of complicated paystubs and complex timesheets.
Secondly, think about budgeting. By receiving a paycheck every week, two weeks or even month, you’re able to establish a budget. You allot this much toward rent, this much toward food and this much toward fun.
“More frequent, and likely variable, checks would seem to be counter-productive in the budgeting process,” says Warren A. Ward, a certified financial planner with WWA Planning & Investments in Columbus, Indiana.
He’s been helping people with investing and planning decisions for more than 25 years. He says he’d be willing to shift to his clients’ needs if an immediate-pay situation were to occur, but he admits it’s not a shift he’d much favor.
“I guess people could invest Monday’s earnings, spend Tuesday’s for lunches out, etc., but I think it’d be a struggle — avoidance of payday loans notwithstanding,” he says.
Holly P. Thomas, CEO of Holly P. Thomas, LLC, a fee-only financial-planning firm in the Tampa Bay area, says the benefits and downfalls of an hourly paycycle all depend on personality.
“If they tend to have problems with spontaneous overspending (and/or over-gifting to others), having a paycheck less frequently tends to help them with spending discipline,” she says.
“But if they are a good saver, they are likely to come out better off, slightly, with more frequent paychecks because their savings will hit the bank/investment account sooner rather than later.”
That is to say, if you’re someone who, on payday, is ready to hit up Amazon to purchase miscellaneous goods you’ve stashed in your shopping cart for the past two weeks, then a daily paycheck probably isn’t the best route for you.
However, Walmart is taking strides to prevent this reckless spending behavior. Through its affiliated app, Even, workers take out only a portion of their wages eight times a year. If they need an advancement more than that, they’ll have to pay a fee. Otherwise, Walmart covers that.
Plus, the app, connected to employees’ bank accounts, calculates how much they need for housing, food and bills. It keeps tabs on what bills must be paid before payday.
Even so, that means workers are getting less money come payday.
Another consideration: Are you guaranteed work? The ups and downs of getting paid one day but not the next could prove tumultuous.
Don’t Worry: Nothing’s Likely To Happen Anytime Soon
This isn’t something to lose sleep over.
Sure, Walmart is implementing this program as an option. And there are platforms out there that you can opt into if it so fits your job and lifestyle, but if you’re coasting along with a steady traditional paycheck — and you’re happy about it — then it’ll likely remain that way.
Really, there’s not enough research on the matter either. In fact, before news of Walmart adopting the Even app, hardly any other news outlet has explored the topic except the New York Times in 2014.
And when I picked the brains of professionals, many were either unaware an hourly paycheck was even “a thing” or wanted to take some time to mull the idea over in their head.
So, no: There’s no immediate threat to our trusty two-week paycheck. But for those who need more immediate pay — and who don’t want to dive into the payday loan cycle — there are options currently available.
But will these models take over? Like everything else in life, only time will tell.
Carson Kohler (carson@thepennyhoarder.com) is a junior writer at The Penny Hoarder. For her, a day-by-day paycheck could prove disastrous because her willpower, on a scale of one to 10, is a solid two.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
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