If there is such a thing as too much financial freedom, pay on demand would seem to qualify.

With pay on demand, employees of participating companies can request salary they’ve earned to date instead of waiting for the usual direct deposit of their paycheque. This flexibility is said to be a help for employers in attracting and retaining workers, and a way to address the financial stress many of their employees feel today.

Anyone besides me see a downside here? Managing your finances from payday to payday is the personal finance equivalent of learning to read. Mastery of your spending is how you find your way to saving, investing, managing debt and building wealth.

I wondered at first if pay on demand threatens to undermine this structure with a technological solution that promotes a live-for-the-day attitude toward money. And then I considered the financial stress many households are feeling and decided to back off.

Pay on demand is offered as an add-on service by companies that manage payroll for big employers. One of these companies, Ceridian, says it has 930 global employers offering its Dayforce Wallet product, with about 50 per cent of employees signing up on average. Ceridian declined to share Canada-specific data, other than to say employers offering Dayforce Wallet in this country include La Vie en Rose, Longo’s, Danone North America and OTG Management.

“What’s great about on-demand pay is that it puts decision-making more in the employee’s hands,” said Deepa Chatterjee, chief operating officer for Dayforce Consumer Services at Ceridian. “It gives them the ability to manage their budgets and their needs rather than having to rely on when their employer is ready to pay them.”

In an on-demand world, the two-week pay cycle most Canadian workers live with does seem anachronistic and a bit patronizing. You’re asked to work harder and smarter to meet the demands of today’s world, but The Man keeps paying you the same way your parents and probably your grandparents were.

Pay on demand is pitched as an update in payroll management to fit the times. People are financially stressed – we know that because financial companies keep telling us so as part of media strategies designed to position themselves as problem-solvers. Pay on demand is described as a way to ease that stress by helping people access their pay in a timelier way.

With Dayforce Wallet, there’s a mobile phone app that shows you how much pay you qualify to receive under limits set by employers. If you want to get some of that money, the app will transfer that amount to a prepaid Mastercard you can use for online and in-person purchases. No fees are charged – Ceridian gets paid by merchants when you use the prepaid card.

Ceridian says it has processed more than $1-billion in on-demand pay since Dayforce Wallet was introduced in the United States in 2020 and Canada in 2021. On average, six on-demand pay requests of around $110 to $120 per request are made a month per participating employee. Engagement is high: 84 per cent of users check their earnings in Dayforce Wallet at least weekly, and 50 per cent use their Wallet prepaid card to pay bills and manage expenses.

Tapping pay on demand is way better than building up credit-card debt or using a payday lender. But today’s financial stress isn’t really about when you get paid. It has much more to do with how much you get paid as inflation drives up living costs and high interest rates make debt more expensive. Only a pay raise or cutting your expenses will help there.

Ms. Chatterjee’s response is that people need a way to manage their spending in financially stressful times, and pay on demand provides this. “We hear stories about how people use funds to do a car repair, or how they bought their kids new winter boots because they outgrew them,” she said.

If pay on demand helps get you through the night, use it. It’s no personal finance apocalypse if you do so, but neither is it an ideal situation. If you can’t make it through two weeks without a cash infusion, how are you going to manage when your regular paycheque comes up short because you already dipped in?

The Globe and Mail, July 24, 2023