With soaring housing prices and inflation at its highest in 30 yearsmillions of Canadians must fend for themselves between pay periods.
After the rent or mortgage is paid, groceries and transit passes are purchased, and other bills are sorted by what’s due next, many of us get by thanks to fumes – or credit – until the next payday.
the Canadian Payroll Association’s most recent survey found that 36% of respondents said they live paycheck to paycheque.
But proponents of a new payroll approach called “early pay access” say the time is up for the traditional model of getting paid once every two weeks.
“It’s an artifact of legacy technology and legacy processes,” said Seth Ross, manager of an early access payroll service called Dayforce Wallet at Ceridian, a human resources and payroll software company based in Ceridian. Toronto and Minneapolis.
“It took a lot of manpower and a lot of computing power back then to manage payroll. Now we can do it continuously and in real time,” he said. Cost of life producer Jennifer Keene.
Early access to salaries – also known as pay-as-you-go – is facilitated by third-party app-based services offered by employers. These allow workers to get some of the money they’ve already earned without the two-week delay or high interest rates offered by payday loan services.
Funds that people access are not considered loans or advances because the money has been earned.
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Cost of life9:00 amEvery two weeks is old news. Get paid every day, if you want!
These apps have been used in the United States and Europe since 2012, but are relatively new in Canada, said Ross, who says Dayforce Wallet has been sold to “well over” 100 Canadian employers.
Some of the other major pay-on-demand players include InstantPay, DailyPay, ZayZoon, and Branch.
How it works
If your cell phone bill is due a few days before payday, you can access the funds to pay that bill before you incur late fees, for example. Or you can restock your groceries when you run out instead of eating ramen for a week.
Dayforce provides workers with a credit card-like payment card to use to access their money and is paid for with a portion of the interchange fee that banks and credit card companies collect from businesses each time a customer uses credit or debit, said Ross, a Canadian based in Los Angeles.
Other providers charge users a flat fee of $2 or $5 for withdrawing part of their salary, but there is no interest payment.
feel the pinch
A woman who works as an architectural designer in Toronto knows what it’s like to run out of money between paychecks.
Although the 30-year-old earns more than $70,000 a year, by the time her rent, utility bills and groceries are covered, the more payments are made on the debt she has accumulated for home expenses. registering for her licensing exams, she often only has $50 until the next pay period. His name is withheld due to his job security concerns.
“Honestly, I would like [could] find the right words to explain the daily fear, anxiety and worry I have every day I wake up and I’m like, OK, I’m so scared to open my TD statements, my bank account statement because I don’t want to have an encore,’ she told CBC Radio.
Despite these challenges, she said she would like to learn more about managing her finances before using an early salary access service to make sure it doesn’t cause her more financial problems.
Marvin Ryder, associate professor of marketing and entrepreneurship at McMaster University’s DeGroote School of Business in Hamilton, said he can see this type of system working as a perk that organizations provide to staff.
“But then you turn it around, will you remember when it comes time to get paid and you’re waiting for the $1,000 from your employer, ‘oh, I’ve already withdrawn $400, so all I receive is $600?'”
Integrated brake system
But most of these early payday services have a modest limit — $200, for example — on how much people can get before payday. ZayZoon cuts users off after accessing half of their paycheck.
Adeola Omole, a Calgary lawyer-turned-wealth-management coach who is working on her second personal finance book, said she sees a role for early access to salary.
“People who live paycheck to paycheck can use this type of program to at least prevent themselves from taking out a payday loan and being charged what I think are predatory fees, and it allows also someone to dip into the money they’ve already earned.”
Ryder said the way we handle payroll today has roots that date back to the start of the First World War, before which three-quarters of Canadians worked in agriculture and were paid cash at the end of each day. .
“We needed a source of income to help fight World War I,” he said, and it was the start of income tax, with employers collecting and remitting on behalf of workers .
“But by the time you have to do the paperwork and the bureaucracy around it, it started to make more sense to accumulate the salary over several days.”
Initially, payment was made weekly, Ryder said. Then, when programs like Employment Insurance and the Canada Pension Plan came into being, bringing with them more payroll deductions, the two-week pay cycle was introduced.
Other than the advent of direct deposit in the 1980s, there hasn’t been much innovation in payroll, he said.
“It’s not that the technology wouldn’t allow it. It just requires a different way of thinking about business cash flow.”
Ross says payroll is “one of the last places we wait two weeks for anything.”
“You can stream anything you want to watch, any song you want to listen to, instantly. You can get anything from Amazon, you know, now same day. Why am I waiting two weeks to be paid for the hours I’ve worked?”
Produced by Jennifer Keene.