What is On-Demand Pay and why should employers care? 

On-Demand Pay (ODP) is fast becoming the norm for many workers. The NHS, Tesco, Capita and McDonald’s already offer it, and one in five Americans and 15% of British workers are already paid this way.

This is the ultimate ‘cheat sheet’ and explains everything employers need to know about ODP in plain English. 

ODP Meaning

ODP is a tool that gives staff the flexibility to access their earned income any day they need, rather than having to wait for payday.

New technology enables this relatively simply, without impacting the employer’s payroll process or cashflow. 

Is this the same as a wage advance or loan? 

No. It’s important to note that this is not a loan and, accordingly, there is no interest to be paid by the employee. It is also not an advance, as only money earned – rather than future earnings – can be accessed. 

Alternative Names for On-Demand Pay

Confusingly, ODP is often referred to by other names, including: 

• Earned Wage Access
• Wage Advance
• Flexible Pay
• Employer Salary Advance Scheme
• Instant Pay
• Early Wage Access

All of the above refer to exactly the same technology, simply by different labels. 

Worked Example 

If Steve gets paid £100 a shift and has worked 5 shifts since his last payday, he has earned £500 in gross earnings. Usually, he wouldn’t be able to access this until payday, which could still be many weeks away. 

ODP would allow him to withdraw a portion of this immediately. If, for example, his employer had set the cap to 50% of gross earnings, Steve could access up to £250 on this day of the month. 

On-Demand Pay Pros For Staff

• Avoid Debt: Without adequate savings, many people turn to debt when unexpected costs arise. ODP is significantly more affordable than credit, approximately 99% cheaper than a payday loan, and is totally debt-free.
• Easier Budgeting: Many workers find it easier to budget over shorter time periods and withdraw money as direct debits come out, rather than managing a single pot of money across a whole month.
• Available to Everyone: Unlike most financial products, ODP is available to all employees for the same cost; regardless of their credit history or relationship with their line manager.

On-Demand Pay Pros For Employers

• Reduce Staff Turnover: Employees are less likely to change jobs and will be reluctant to move into roles where they cannot be paid on demand. Some employers have reported reductions in staff turnover as high as 50%.
• Recruit Staff More Quickly: If a candidate has a choice between two very similar jobs, but one offers ODP, they are likely to choose this over one that does not.  
• Fill Shift Rotas: Staff are far more motivated to work overtime and extra shifts when they get paid for them sooner. Some employers have reported more than a 60% increase in shift-filling even when paying the same hourly rate. 
• Reduce Absenteeism: Studies have shown that On-Demand Pay reduces absenteeism by an average of 13%, as workers are less stressed about their finances and reminded more frequently of the financial reward for their work.

On-Demand Pay Adoption in the UK

ODP has proven very popular with workers in recent years and enjoys a much higher take-up rate than almost all other employee benefits. It is common for over 50% of staff to use it at some point.

Nine out of ten UK workers would like access to it and, as reported in the Guardian, a majority of British workers would even prefer ODP to extra paid holiday. 

Amongst the HR community, there is a growing consensus that, over the next 12 months, ODP will, in some industries, shift from a ‘nice-to-have’ to a ‘must-have’. 

15% of all UK employers now offer On-Demand Pay including, but not limited to:

• Amazon
• The NHS
• Amazon
• Local councils 
• Capita
• Tesco
• Green King
• Hilton
• McDonald’s
• Subway
• Walmart
• Co-op
• And many more…