STORY INLINE POST
Let me share with you some insights on the future of payroll and its likely transformation. You’re about to find out where the payroll is headed and its impact on the traditional pay pattern, representing a new mechanism for financial wellness and education.
Firstly, one needs to understand how the conventional pay cycle began. Wages were paid the same way for more than 100 years, as adopted during the Industrial Revolution. Back then, employees would normally receive their salary daily. After completing their tasks, workers would collect their wages at the end of the workday.
Many years later, faced with World War I, the USs government had to recapitalize to compensate for all the expenditures war implied, so they imposed new taxes on payrolls, and employers began paying tax on behalf of their employees via accounting and bookkeeping. This new responsibility for calculating payroll taxes resulted in a management burden for the company and a disruption to the daily wage payment system. As a result, employers started to pay their employees weekly, every 15 days, or monthly to properly calculate and pay taxes.
So now we’re faced with an inconsistency, payroll changed but the way people spent stayed the same. This is still true today, as we still spend daily, which means we as employees finance the company we work at, working for seven or 15 days yet getting paid afterward.
A couple of studies predict an end to the current payment method by 2025, and I strongly believe it. For example, as stated by Edward Segal in Forbes, based on a new poll, “A majority of U.S. workers (83%) believe they should have access to their earned wages at the end of each workday.” I believe this shift in perspective on wage periodicity was largely influenced because of the COVID-19 pandemic, and the challenges it presented to all employees and the workplace in general.
There has been a significant search for work-life balance since the so-called Great Resignation, which refers to the enormous number of people who decided to quit their jobs ever since the pandemic started and throughout. This showed us that employees now have different priorities when it comes to looking for a job or deciding to stay in one, such as new working practices, the ability to work from home, flexibility in hours as well as an adaptable payment method and schedule. As a response, companies are now looking for distinct ways to address this, offering all kinds of benefits, not only economical, but emotional as well. For example, by offering Earned Wage Access, employees will have more financial security, well-being and less stress, making it less likely for them to leave their job.
Earned Wage Access has gained massive growth in developed countries, such as the USand Great Britain, and is quickly expanding to developing countries. Technology plays a key role in this transformation; we have seen in the industry that human capital management has been evolving rapidly and implementing new products as the latest way of paying wages.
Companies are adapting to these new ways of paying employees and human resources areas are using and promoting these tools as new benefits, thus positively impacting the company by reducing turnover and increasing employees’ productivity by decreasing financial stress.
I strongly believe that these mechanisms will be the new way of getting paid. These products have been around for a couple of years now, and this is just the beginning, the tip of the iceberg.
We at Pulpi are working on going one step further by understanding where the payroll will end up and its effect on every employee that uses our technology. I want to emphasize that acknowledging the possibility of using artificial intelligence to create tools that benefit our users represents a huge opportunity for financial education, financial planning, and helping every employee achieve their financial goals.
I recognize the possibilities and am certain that our industry must move in that direction by tying common expenses to payroll using new financial tools. After analyzing our data along with economic trends, we concluded that if our users have an assured income from earned wages without restriction from pay periods, there’s room for collaborative consumption, where the cost of a good or service is divided over a larger group, representing a huge benefit.
We wish to provide consumers with the chance to maximize their income through careful budgeting and payroll deductions. This will enable them to benefit from improved market conditions and represent a good financial gain.
Payroll has limitless power, and we anticipate a successful future. If we can take advantage of the deduction priority and link it to every spending, saving, and credit, we’ll then not only help the employee, but consumers and businesses as well.
We are happy to see how swiftly technology is developing in this field because it gives us hope and reassurance that we are headed in the right direction.