Why the changing workforce requires a new payment strategy

Today’s workforce looks decidedly different from the employee base that fueled previous generations of companies. Organizations now leverage self-employed, contract, freelance and gig workers across various industries and for numerous reasons. This evolving worker mix enables companies to keep pace with rapid growth, fill immediate labor gaps and use contract workers for specific projects — so that full-time employees can focus on more strategic work.

However, the range of employee types requires companies to rethink their payroll practices for a new era. Some workers need immediate payment, others send invoices and still others are hourly.

“Many people think of payroll processing as a traditional batch process that you run once a week or monthly,” says Adam Carter, vice president and group product manager at U.S. Bank. “But a gig economy approach to the workforce means many companies are now coloring outside those lines.”

The result is a demand for payment strategies and solutions that enable you to provide employees with multiple options that fit their changing payment needs.

A changing workforce

While self-employed, contract or freelance workers have long existed in specific industries, they are now ubiquitous across the workforce. The Bureau of Labor Statistics reports that 7.4% of U.S. workers are independent contractors and another 4.3% are contingent employees, meaning they’re employed for specific projects or temporarily. These workers include everything from truck drivers to retail gig employees to freelance creatives.

Using a broad mix of workers has several benefits. For example, companies can scale up or down without the stress of hiring (or firing) multiple people. This is especially useful for startups or organizations experiencing significant growth. Gig or contract employees can also make it easier for manufacturers or retailers to respond to urgent labor needs, such as hiring people for the holidays or to complete a significant order. Additionally, contract or freelance employees make sense when companies need specific expertise or skills for a project.

The options for employees give employers an advantage, but they make payroll more complex. Each worker may have a different expectation or preference for how and when they receive payment. For example, an unbanked worker may prefer a prepaid debit card over a check to avoid a check-cashing fee. Or a gig worker may want to be paid immediately without providing sensitive bank account information.

The bottom line: Paying workers is no longer one size fits all. Megan Musto, U.S. Bank sales manager for prepaid cards, says finding ways to meet the evolving payment demands is critical. “Providing an efficient payment experience has become table stakes for employers who want to retain talent,” she says. “Your payment solutions can be the differentiator.”

Developing a payment strategy

As your workforce evolves, your payroll management best practices need to as well. Consider a holistic approach that gives employees options regarding how and when they’re paid. As you elevate your payment strategy to meet these expectations, consider payment portals that:

• Prioritize employee choices. Modern payment portals often enable workers to select and change payment types as their preferences shift. “With the unemployment rate still relatively low, workers can seek out companies that provide payment options and flexibility,” Carter says. The ability for employees to easily choose their preferred payment method, without additional paperwork or phone calls, is essential. 
• Protect employee data. “It’s really important for employees and employers to know that their payment details are secure,” Musto says. As worker payment preferences change, employees also want to know about payment options that don’t require them to provide banking details or other sensitive financial or personal information.
• Enable rapid payment. As noted, contract or gig employees are often interested in being paid immediately — and that can be challenging if you rely on ACH or paper checks. A payment strategy that includes multiple payment options, from prepaid payroll cards to push-to-card options, gives workers immediate access to their funds.
• Create a partnership of trust. Given the sensitive and critical nature of payments, working with a partner whom you trust is paramount. Carter notes that companies have many options, including traditional banks and other payroll system providers. “It’s about finding the right mix of expertise and solutions that will allow the employer to offer what their employees need,” he says.

Finding the right payment mix

Payment solutions have moved far beyond traditional checks and direct deposit. As you revamp your payment strategy, look for a mix of modern payment types, including:

• Instant payments. These real-time payments move through the RTP® network and FedNow® Service to give employees immediate access to their funds. Instant payments are especially useful in food service and other industries where workers may expect payments immediately after their shift. Instant payments are not only secure, but they provide rich payment data and high transaction limits for larger payments.
• Push-to-card payments. Push-to-card lets you send individual payments within minutes to any eligible Visa or Mastercard debit or prepaid card, while reducing manual tasks and the cost of issuing checks. Powered by Visa Direct, push-to-card payments also provide fraud monitoring and detection, giving employees confidence that their payment information is secure.
• Disbursements via Zelle®. Employers with access to the Zelle® network can transfer payments to contractors or employees with eligible savings or checking accounts. The setup is simple: You need only a worker’s email address or phone number to start.
• Prepaid payroll cards. “Many employers are looking for the easiest way to pay employees in the moment,” Musto says. This is true for gig, contract and full-time employees. With prepaid card solutions, workers receive debit cards they can use to make purchases immediately; no bank account is required.

As your employees change and evolve, you can build a payment strategy that meets their needs. Connect with U.S. Bank treasury experts to learn more about how our payment solutions can serve the demands of your evolving workforce.