Employee payment app renders traditional pay cycle obsolete

Living paycheck to paycheck is generally regarded as an indication of cutting it a little too close to the edge, or evidence of sub-optimal personal financial management. But some employees can’t even afford to wait for their next paycheck to arrive, and for them there’s a new app for that – assuming their employer is willing to go along with it.

Introducing Activehours, a Palo Alto, Calif.-based tech company founded in 2013 that has recently established alliances with several timesheet providers to enable hourly workers to gain immediate access to pay for hours they have already worked. In effect, they are given the freedom to live day-to-day, or even, in theory, hour-to-hour.

Also see: Payroll option allows employers to pay for employees to go to exchanges

“For the first time, employers will be able to offer their employees who are paid hourly with direct deposit access to their earned pay at any time, no matter where they are in the pay cycle,” according to Margaret Farrell, a spokesperson for the company.

Paying with tips

Employees pay no fees for the service, but merely pay “tips” to Activehours “based on what they think is fair,” according to the company.

The company now has strategic partnerships with TSheets, WebPunchClock, Brink Software and When I Work, expanding the availability of the service. The app, in Android and iOS versions, was already “available to the over 75 million hourly workers and on-demand workers in the U.S.,” according to the company.

Why would employers want to facilitate this service? In part to be on the cutting edge, Activehours suggests. In a statement released with the announcement of its new partners, Activehours said this payment tool represents “a new generation of benefits that can be run and managed by employees from their smartphones.”

Also see: 7 ways to make a millennial tick

An executive with an employer that facilitates its employees’ use of the service quoted in the company’s announcement said “we’re always looking for new ways to make sure that our employees love their jobs… this [new service] will mean that our employees have the kind of control over their finances that will keep them happy and motivated at work.”

Pay cycle “unfair”

More than half (52%) of millennial generation hourly workers responding to a survey commissioned by Activehours consider the traditional biweekly pay cycle “unfair.” Also, 25% of them said that having immediate access to earned pay “would have a bigger impact on their finances than increasing their hourly wage.”

Activehours appears to be focusing on the millennial generation that, according to the company, as of 2015, represents more than half of the workforce. “Despite being gainfully employed, many millennials are finding it more difficult to save during a time of increased student debt, rising rents and a slowly improving job market,” Activehours asserts.

Whether waiting until the end of a two-week pay cycle to be paid represents “saving” may be a topic of discussion during 401(k) enrollment sessions.