End of the Two-Week Employee Paycheck Cycle? Not Yet, Experts Say

New technology and increased demand from hourly employees is driving a new, more immediate paycheck experience – but at a moderate pace.
By Brian O'Connell ,

For decades, the American worker has typically waited a week, or more likely, two-weeks to get paid from employers.

Delayed pay cycles can be a problem, though, as many hourly workers face late bill payments, checking account overdraft fees or high-interest payday loans.

An "immediate" paycheck can turn that situation around - for employees and employers.

A new survey from ActiveHours, a paycheck technology service that helps companies pay workers faster, bears that point out. The report states that employees who get paid earlier, or "when they want it," boosts motivation and cuts sick days and other "unplanned workplace absences."

In addition:

• 70% of respondents said having early access to their pay helped them reduce unplanned absences from work

• Nearly 66% of users surveyed said they were more motivated to work knowing they could get early access to their pay

"As technology allows us to make advances in the way money is processed, the two week pay cycle is becoming a remnant of slower times," says Ram Palaniappan, ActiveHours founder and president who of course has a stake in the result of this survey. "It's in the best interest of both workers and their employers that people be paid as they work. Luckily, we now have the means to do it, even without integrating with the employers."

While employees would likely appreciate faster paychecks, that doesn't mean companies are diving in head first to accommodate them - at least not in great numbers, and at least not yet.

"Technology is making things easier, but I don't see any company paying faster than weekly," notes David Barron, attorney, and labor law specialist with the law firm Cozen O'Connor.

There are a couple of good reasons, he explains. "First, overtime is measured on a work week basis under federal law, and in most states," Barron says. "Accordingly, the U.S. Department of Labor requires that records be kept on a work week basis. As a practical matter, this creates a natural barrier at one week."

But one week seems to be a "consensus" new limit going forward, he adds. "Technology has allowed payroll systems to be updated more quickly and decreased lag times between input and processing of what are largely electronic paychecks," Barron states. "The days of long lag times between work and checks are largely gone, which benefits employees living paycheck to paycheck."

For employers, however, longer payroll cycles can be beneficial because it provides more time to catch errors. Larger paychecks (and longer pay periods) provide employers more leverage against a departing employee who may not return a phone, laptop or other equipment, if that employee has authorized a deduction against pay.

Also, some companies do see the benefits of faster paycheck payments, especially as an employee retention tool, but they have their own reasons for moving slowly on the issue.

"Flexibility is a key tenet at MyCorporation, and we are always looking at the new technologies coming out," says Dana Case, head of human resources at MyCorporation.com. "However, we still have a traditional two week pay period in place."

Case says she's found the concept of work-life balance to become especially prominent in the workplace, especially in the summer months, and around holidays. "Our talent relishes the flexibility, and we know "life" gets a little more unavoidable when the kids are out of school and the family has vacations planned," case says.

"Unfortunately, our flexibility also means that there are many different schedules in our office at any given time," she adds. "The major issue with instant pay periods arise with the timekeeping technologies used. Yes, there are advancements in the technology, but mistakes still happen and time calculation issues still exist. The two-week pay period allows us to ensure everything is in order, letting us pay our employees on a set date with their correct amount every time."

For the U.S. worker who wants to get paid more quickly, the wheels have apparently started churning in their favor. Just expect to wait a year or two before you see some real momentum.

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