Apps Offer Lifeline for Workers Facing Hardship Between Paychecks - NBC4 Washington

Apps Offer Lifeline for Workers Facing Hardship Between Paychecks

A growing number of companies are rolling out products and services that allow employees to receive a portion of their pay when they need it

    processing...

    NEWSLETTERS

    Apps Offer Lifeline for Workers Facing Hardship Between Paychecks
    Pakin Songmor/Getty Images
    A growing number of companies are rolling out products and services that allow employees to receive a portion of their pay when they need it.

    What to Know

    • Some companies are now offering employees the ability to receive part of their pay when they need it

    • About one third of U.S. adults were either unable to pay their monthly bills or were one setback way from financial hardship last year

    • While there can be downsides to this, companies are working to counteract them, through things like limiting how much cash can be taken out

    Luis Vazquez and his girlfriend were down to their last $50 after she got sick and had to miss work for a month.

    He already paid his rent and bills for the month, but without her income the couple couldn't cover groceries and other essentials. His next paycheck was more than a week away.

    Faced with a similar cash crunch years ago, Vazquez had resorted to a payday loan, a high-interest, short term loan meant to tide a borrower over until the next paycheck. But the couple and their toddler son were eventually evicted from their apartment because they couldn't make both their rent and the loan payments.

    Vazquez vowed never to take out such a loan again. This time, he had another option. An overnight support manager at Walmart, Vazquez was able get a $150 advance on his pay using an app that allows the company's employees to access up to half their earned wages during a pay period.

    Explaining the Yield Curve Inversion with Gummy Candy

    [NATL] Explaining the Yield Curve Inversion with Gummy Candy

    A yield curve inversion has been a reliable predictor in a coming recession, but what exactly is a yield curve inversion? We explain... using gummy candy.

    (Published Wednesday, Aug. 14, 2019)

    A growing number of companies are rolling out products and services that allow employees to receive a portion of their pay when they need it. This can help workers, especially those making hourly wages or working irregular schedules, to avoid unpleasant and potentially costly options such as borrowing from loved ones, running up credit card debt, selling possessions or taking out payday or other high-interest loans when bills come due or emergencies arise before the next paycheck.

    Could this be the future of payday? Developers of flexible-pay services say adhering to a rigid pay cycle doesn't make sense.

    Josh Reeves, CEO and co-founder of the payroll company Gusto, sees a model in the way parents pay their kids for doing chores.

    "If they mow the lawn, they get paid right away," Reeves says. "We think in the future, everyone will get paid (for their work) when they do it."

    Some experts acknowledge that giving employees early access to their pay can backfire if, for instance, they spend the money unwisely. But the need for flexible pay services is clear. About one-third of U.S. adults were either unable to pay their monthly bills or were one modest financial setback away from financial hardship last year, according to a recent survey by the Federal Reserve.

    Vazquez started working at Walmart in November and says he used the app six times since Walmart made it available in December. The app was developed by the technology company Even.

    Bulletproof Backpack Sales Spike in Wake of Recent Shootings

    [NATL] Bulletproof Backpack Sales Spike During Back-to-School Season

    Do children need bulletproof backpacks as they head back to school? Many families say yes—sales of bulletproof backpacks, effective against handguns, have spiked by 200%, according to manufacturers. Child psychologists, however, say the bags can carry a mixed message for children. 

    (Published Wednesday, Aug. 14, 2019)

    Vazquez pays $6 a month to use the app — there is no transaction fee. By comparison, a payday loan typically carries an annual percentage rate of 300 percent to 500 percent and is due in a lump sum, or balloon payment, on the borrower's next payday. Vazquez didn't provide the terms of the payday loan he took out years ago.

    "It gives me peace of mind," Vazquez says.

    Newer companies such as Uber and Lyft have used immediate payment as their model for years. Now other organizations are catching on to the advantages of a flexible payday.

    Jon Schlossberg, CEO of Even, says more than 200,000 of Walmart's 1.4 million U.S. employees use his company's app, which also has a cash flow projection feature that deducts upcoming bills from expected pay and shows users an "okay to spend" balance.

    Gusto, which provides its payroll services to more than 60,000 businesses nationwide, recently began offering its flexible pay option as an add-on feature at no cost to employers or employees. The company just launched the service in Texas and plans to expand it to additional states later this year.

    There's a tremendous need for such services in the U.S. for several reasons, says Rachel Schneider, of the Aspen Institute Financial Security Program and co-author of the book The Financial Diaries: How American Families Cope in a World of Uncertainty.

    Drone Video Captures Raid on Jeffrey Epstein's Private Island

    [NATL] Drone Video Captures Raid on Jeffrey Epstein's Private Island
    Drone footage captures law enforcement searching the private island of Jeffrey Epstein as agents investigate allegations of a sex trafficking ring.
    (Published Tuesday, Aug. 13, 2019)

    Income and spending needs are volatile and don't always match up. While some households might be able to make their finances work on paper over the course of a year, they could end up short in any given month, she says.

    Some families can build up savings to provide a cushion. But for many workers, the cost of living is outpacing wage growth by such a wide margin that "expecting them to save their way out of volatility is not realistic," Schneider says.

    Cutting checks for every employee used to be time-consuming and costly for companies, which partly explains why many have spread out the pay period. Now the process is largely automated and new technology has enabled more flexibility in timing.

    "It takes no extra effort or little effort, so leaving people subject to an outdated rhythm payment or cadence, there's no real logic to it," says Schneider.

    There are some potential downsides though.

    The immediate access to cash may encourage some people to pick up extra shifts when they are short. While that makes sense in the near term, it can backfire on workers over time. This bigger pool of labor could take the pressure off employers to increase wages, Schneider says.

    Employees could also burn through cash faster. Some companies have countered that by limiting the number of times workers can access their money or by only making a portion available. And some are adding a financial counseling component to their services.

    FlexWage Solutions is offering a package that combines its flexible pay service with Trusted Advisor, a mobile phone tool developed by the New York City nonprofit Neighborhood Trust Financial Partners, to give employees access to one-on-one financial counseling. Restaurant chain Panda Express is the first to sign on, says FlexWage CEO Frank Dombroski.

    The two organizations are also testing an app that would integrate the flexible pay and counseling functions with a cashflow projection feature.

    Developers of flexible-pay services also say they can help employers stand out in the current tight job market in the U.S.

    Instant Financial, which began offering flexible pay options in 2017, says its Instant Pay service improves employee satisfaction, increases job applications and reduces turnover.

    The company, based in Canada, works with a number of large U.S. employers, including McDonald's, Outback Steakhouse and Wendy's restaurants.

    Dayton Police Find No Evidence Gunman Was Assisted During Shooting

    [NATL] Dayton Police Find No Evidence Gunman Was Assisted During Shooting

    Dayton Police Chief Richard Biehl on Tuesday held a news conference on the investigation into the Aug. 4 mass shooting.

    (Published Tuesday, Aug. 13, 2019)

    "How we pay people is inefficient and it's broken," says Steve Barha, CEO of Instant Financial.