Page 25 - ARUBA TODAY

BUSINESS Tuesday 7 augusT 2018
A25

A lifeline for workers who face hardship between paychecks

By SARAH SKIDMORE SELL the near term, it can back-
ALEXANDRA OLSON fire on workers over time.
Associated Press This bigger pool of labor
Luis Vazquez and his girl- could take the pressure
friend were down to their off employers to increase
last $50 after she got sick wages, Schneider says.
and had to miss work for a Employees could also burn
month. through cash faster. Some
He already paid his rent companies have coun-
and bills for the month, tered that by limiting the
but without her income number of times workers
the couple couldn't cover can access their money or
groceries and other essen- by only making a portion
tials. His next paycheck was available. And some are
more than a week away. adding a financial counsel-
Faced with a similar cash ing component to their ser-
crunch years ago, Vazquez vices. FlexWage Solutions
had resorted to a payday is offering a package that
loan, a high-interest, short combines its flexible pay
term loan meant to tide a service with Trusted Advisor,
borrower over until the next a mobile phone tool devel-
paycheck. But the couple oped by the New York City
and their toddler son were nonprofit Neighborhood
eventually evicted from In this July 28, 2018, photo, Luis Vazquez, an overnight support manager at Walmart in Dallas, Trust Financial Partners, to
their apartment because poses for a photo. give employees access to
they couldn't make both Associated Press one-on-one financial coun-
their rent and the loan pay- seling. Restaurant chain
ments. the future, everyone will organizations are catching savings to provide a cush- Panda Express is the first
Vazquez vowed never to get paid (for their work) on to the advantages of a ion. But for many workers, to sign on, says FlexWage
take out such a loan again. when they do it." flexible payday. the cost of living is outpac- CEO Frank Dombroski.
This time, he had another Some experts acknowl- Jon Schlossberg, CEO ing wage growth by such a The two organizations are
option. An overnight sup- edge that giving employ- of Even, says more than wide margin that "expect- also testing an app that
port manager at Walmart, ees early access to their 200,000 of Walmart's 1.4 mil- ing them to save their way would integrate the flexible
Vazquez was able get a pay can backfire if, for lion U.S. employees use his out of volatility is not realis- pay and counseling func-
$150 advance on his pay instance, they spend the company's app, which also tic," Schneider says. tions with a cashflow pro-
using an app that allows money unwisely. But the has a cash flow projection Cutting checks for every jection feature.
the company's employees need for flexible pay servic- feature that deducts up- employee used to be time- Developers of flexible-pay
to access up to half their es is clear. About one-third coming bills from expected consuming and costly for services also say they can
earned wages during a of U.S. adults were either pay and shows users an companies, which partly help employers stand out in
pay period. unable to pay their monthly "okay to spend" balance. explains why many have the current tight job market
A growing number of com- bills or were one modest fi- Gusto, which provides its spread out the pay period. in the U.S.
panies are rolling out prod- nancial setback away from payroll services to more Now the process is largely Instant Financial, which be-
ucts and services that al- financial hardship last year, than 60,000 businesses na- automated and new tech- gan offering flexible pay
low employees to receive according to a recent sur- tionwide, recently began nology has enabled more options in 2017, says its In-
a portion of their pay when vey by the Federal Reserve. offering its flexible pay op- flexibility in timing. stant Pay service improves
they need it. This can help Vazquez started working at tion as an add-on feature "It takes no extra effort or employee satisfaction, in-
workers, especially those Walmart in November and at no cost to employers or little effort, so leaving peo- creases job applications
making hourly wages or says he used the app six employees. The company ple subject to an outdated and reduces turnover.
working irregular sched- times since Walmart made just launched the service in rhythm payment or ca- The company, based in
ules, to avoid unpleasant it available in December. Texas and plans to expand dence, there's no real logic Canada, works with a num-
and potentially costly op- The app was developed by it to additional states later to it," says Schneider. ber of large U.S. employ-
tions such as borrowing the technology company this year. There are some potential ers, including McDonald's,
from loved ones, running Even. There's a tremendous need downsides though. Outback Steakhouse and
up credit card debt, selling Vazquez pays $6 a month for such services in the U.S. The immediate access to Wendy's restaurants.
possessions or taking out to use the app — there for several reasons, says cash may encourage some "How we pay people is inef-
payday or other high-inter- is no transaction fee. By Rachel Schneider, of the people to pick up extra ficient and it's broken," says
est loans when bills come comparison, a payday Aspen Institute Financial shifts when they are short. Steve Barha, CEO of Instant
due or emergencies arise loan typically carries an Security Program and co- While that makes sense in Financial.q
before the next paycheck. annual percentage rate of author of the book The Fi-
Could this be the future of 300 percent to 500 percent nancial Diaries: How Ameri-
payday? Developers of and is due in a lump sum, can Families Cope in a
flexible-pay services say or balloon payment, on the World of Uncertainty.
adhering to a rigid pay cy- borrower's next payday. Income and spending
cle doesn't make sense. Vazquez didn't provide the needs are volatile and
Josh Reeves, CEO and co- terms of the payday loan don't always match up.
founder of the payroll com- he took out years ago. While some households
pany Gusto, sees a model "It gives me peace of mind," might be able to make their
in the way parents pay Vazquez says. finances work on paper
their kids for doing chores. Newer companies such as over the course of a year,
"If they mow the lawn, Uber and Lyft have used im- they could end up short in
they get paid right away," mediate payment as their any given month, she says.
Reeves says. "We think in model for years. Now other Some families can build up