For decades, most American companies have paid their workers once every week or two, minimizing the administrative costs of frequent paydays and maximizing the interest the companies earn by keeping the money in the bank.

And for equally long, workers have complained about the unfairness of waiting for their paychecks.

But now, thanks in part to the gig economy, a small but growing number of employers and start-ups are testing ways to give employees faster access to their wages. A variety of options — some involving payroll cards, and others using A.T.M.s and other methods — have recently hit the market, permitting people to take home their pay as soon as they have earned it.

On one hand, this could be good news for people who live from paycheck to paycheck. If the trend catches on, it could reduce the demand for products like payday loans, which workers use when they run short of money, but which charge very high interest rates. On the other hand, the services that are providing on-demand wages charge fees every time a worker uses them, so there is a trade-off.

From the employer’s perspective, instant payment for a day’s work has the potential to motivate employees to work longer hours — after all, instant financial gratification is a powerful productivity incentive.

In the ride-sharing market, same-day earnings payouts moved rapidly from an experiment to an industry standard. In November, Lyft began offering its drivers the option of cashing out immediately instead of waiting for their weekly payday. More than a third of them have used the feature, which costs 50 cents a transfer, and Lyft has paid out $200 million, executives say.

Uber started testing a similar system in March, pushing drivers’ earnings to a prepaid debit card from GoBank. Last month, it made the option available to nearly all of its 450,000 active drivers in the United States.

Start-ups are also circling. DailyPay, a New York company that lets on-demand workers collect their earnings faster for fees of $1 to $1.50 a day, has enrolled thousands of drivers and delivery people.

“I’ve been surprised at how fast it caught on,” said Harry Campbell, a driver who writes about the industry on his blog, the Rideshare Guy. “It became a competitive advantage. Once Lyft had it, and it was really popular, Uber had to have it too.”

But gig services are a niche part of the job market. Fast cash has long been a perk for waiters, bartenders and other tipped workers. Most Americans draw their paychecks from companies with more rigid financial systems. In that market, there has been little incentive for change — until recently.

Even among those with steady jobs, financial insecurity is pervasive, and some employers are starting to look at how they can help. Giving raises is expensive. Giving people quicker access to their accrued earnings doesn’t have to be.

Eight months ago, Goodwill of Silicon Valley began testing a system that lets its workers use an A.T.M. near the company’s cafeteria to withdraw up to half of the wages that they have already earned from their next paycheck, to a limit of $500. It was an instant hit. More than half of Goodwill’s 300 eligible employees have used it at least once.

Michael Fox, the company’s chief executive, said he was initially skeptical but became a convert when he saw what a big difference the option made for some workers.

“When you have people living on the edge, very small things can cause a rapid acceleration into very bad conditions,” he said. “If you’re just $60 or $90 short, and can’t make a rent payment or buy medicine, it spirals. One little thing creates a huge disaster.”

Goodwill is using technology from PayActiv, a start-up in San Jose, Calif., that uses employers’ wage and hours information to estimate their employees’ earnings. For a fee of $5 per transaction — of which Goodwill pays half as a courtesy to its workers — PayActiv advances the cash. On payday, it recoups the money directly from the employer.

PayActiv’s founder, Safwan Shah, talks with a missionary zeal about the potential impact. “The biggest bank in this country is the bank of the employer, and two to three weeks of salary for most people is stuck there,” he said. “This is a corporate responsibility issue.”

Getting employers to view it that way, though, is an extremely hard sell. Frank Dombroski knows. He has been making the pitch for five years and is only just starting to see signs of momentum.

Mr. Dombroski’s company, FlexWage, of Mountainside, N.J., also advances employees part of their earned but unpaid wages, but unlike PayActiv, it doesn’t use its own money to fund the transactions — it pulls cash directly from employers’ coffers. That is the most financially sustainable approach, he says, but it appeals to only the most highly motivated employers.

“I would be lying if I didn’t say it’s been a struggle, but we kind of knew that going in,” he said.

He thinks the tide is starting to turn. A new partnership with ADP, a big provider of payroll services, has helped FlexWage get on the radar of bigger businesses. The company says it is finalizing deals with two employers that would double the 8,000 people currently using its system.

“There’s been so much attention to the high cost of short-term lending, like bank overdraft fees and payday loans, that employers understand a lot more clearly now the dire need,” Mr. Dombroski said. “We don’t have to convince them that there’s a problem any longer. Now we need to convince them there’s a solution.”

Some companies that facilitate faster access to wages cut out the employer and go right to the workers. Two years ago, Activehours, in Palo Alto, Calif., started offering an app that lets hourly workers snap photos of their time sheets and cash out their coming wages in advance. On payday, Activehours withdraws the money from the worker’s checking account. People at about 10,000 businesses have tried it, including workers at Apple, Starbucks, Whole Foods, Best Buy and Home Depot, the company says.

Like almost all fast-cash borrowing options, the services have fees that can be steeper than alternatives like credit cards. Activehours has a hippie-ish “pay what you think it’s worth” fee structure, but FlexWage and PayActiv charge rates that typically cost $3 to $5 per transaction. A worker who pays $3 to withdraw $100 a week before payday is effectively paying an annual percentage rate of 156 percent for the money.

But those costs still tend to be lower than those of bank overdrafts, payday loans and other emergency lending sources. Eric Zsadanyi, a forklift driver at Goodwill, has been using PayActiv advances almost monthly to pay his rent, which consumes more than one of his biweekly paychecks. He is usually only $50 or $100 short, but if his rent isn’t on time, he owes a $50 late fee.

Mr. Zsadanyi keeps his withdrawals low so that his next check won’t shrink more than he can afford. Knowing that in a bind he can get cash for rent or groceries is a relief, he said.

Factories, hospitals, call centers and other employers with large numbers of variable-hour employees have been among the most receptive to the idea, according to executives at PayActiv and FlexWage. Especially in industries with thin margins, companies are willing to consider new ways to relieve financial strains on their employees — without actually paying them more money.

Still, the biweekly payday is a ritual most companies don’t want to disturb. The regularity with which clients of Paychex, one of the nation’s largest payroll processors, pay their workers — weekly, biweekly or on some other cycle — has not shifted by more than 1 percent over the last eight years. Martin Mucci, the company’s chief executive, is skeptical that faster access to wages will ever move beyond the gig economy.

“It’s not something we’re seeing a large demand for among employees who have a more traditional work relationship with their employer,” Mr. Mucci said.

Ryan Falvey, managing director of the Financial Solutions Lab at the Center for Financial Services Innovation, thinks that might change if people feel more empowered to push back. After all, the era when it took a bookkeeper days to go through time sheets and cut checks is long gone.

“As the economy has gotten faster and people’s lives have become more tenuous, the speed at which people get paid starts to matter lot more,” he said. “I don’t think this is a flash-in-the-pan thing. A year or two in, these are products that have significant user engagement, and they’re growing very quickly.”

For workers, choosing between speed and delayed gratification can be a balancing act.

Amanda Brannon, a single mother of four in Warner Robins, Ga., said that same-day pay was a major incentive for her to moonlight for Uber. If she needs to supplement her grocery or gas budget, she hops in her car and starts driving. A recent 12-hour Saturday shift netted her $220, which she cashed out immediately.

But in her day job, as a legal secretary, she is happy to stick with a traditional lump-sum check.

“It makes it easier to pay for the big stuff,” Ms. Brannon said. “Uber is perfect for daily cash, but getting paid every two weeks is good, too.”Click here for the original article. 

Some may say the minimum wage raise is inevitable. Of course there are staunch opinions on both sides raising very challenging issues. “Gov. Jerry Brown [of California] announced a landmark deal between lawmakers and union leaders that would increase the state’s minimum wage to $15 an hour by2022 for employers.” California’s current $10 per hour would be gradually increased over the next six years. Brown comments ” This plan raises the minimum wage in a careful and responsible way and provides some flexibility if economic and budgetary conditions change.” It should be noted that “if the legislature does not adopt the plan as negotiated…the group may go forward with bringing the minimum wage hike directly to voters.”

Lisa Jennings reports on the details of this wage hike. Providing perspectives from all sides, she captures a more complete picture of those involved and their reactions.

Read the full article here.

Andria Ryan of Fisher & Phillips provides an in-depth look at the wage and hour woes including penalities and areas known for violations. Are you prepared for an unannounced visit from the DOL? There are a number of areas that are of particular concern regarding the hospitality industry including but not limited to exemptions, child labor, tipped employees, and state and local requirements. “The Wage and Hour Division considers hospitality workers and other low-wage workers to be particularly vulnrable.” There is an ever increasing “risk of legal challenge for wage and hour violations” as well as penalty fines. Because of ever evolving regulations, it is important to be at the front of any changes or updates. Hospitality employers should review their policies to be sure they are in compliance.

Read the full article here.

For companies, owners and operators in the hospitality industry, the DOL’s aggressive enforcement efforts is not news. The industry has been a major target of the DOL over the last decade and part of the estimated $1 billion dollars that has been recovered for 1.2 million workers by the DOL’s Wage and Hour Division (WHD) since 2009.

What should concern the industry is that the DOL seems resolute to not just keep the pressure up on the minimum wage front, but actually increase it. In fact, the WHD has had the hospitality industry in its sites for some time, classifying it as a “high risk” industry. In response to the report, U.S. Secretary of Labor Thomas Perez remarked that, “to address the scale of this problem, we will redouble our enforcement efforts and partnerships to ensure workers take home the wages they earned and deserve.”

Regulatory and Legal Pressure

As if an invigorated and focused DOL was not motivation enough to treat the wage and hour risk seriously, hospitality industry players are facing significant financial risk from the private plaintiffs’ bar in the form of class and collective action lawsuits. Recent examples include multimillion dollar suits filed against a national restaurant chain and a franchise fast food chain, settlements paid to employees of a chain of New York restaurants and those of an Indianapolis hotel staffing company.

Private lawsuits filed under the FLSA are on pace to hit a new record high in 2014 and top 8,000 cases filed in federal court, easily topping the 7,764 FLSA cases filed in 2013. Nearly a decade ago the number of FLSA cases was half that.

Nationwide chains and franchise operations have proven particularly susceptible to class action risk as plaintiffs’ attorneys have sought to recruit and gather individuals for large classes. NERA Economic Consulting estimated that some 10 percent of all private wage and hour settlements in 2012 involved defendant companies in the food and food services industry alone.

Hospitality companies are particularly challenged by wage and hour issues, because they employ a large number of low wage workers in an industry that often has razor thin profit margins.

But minimum wage is just part of the story. Overall wage and hour violations present similar if not greater risks to the industry. This includes challenges to the use of tip credits (as well as its use with employees who perform tipped and non-tipped roles), allegations of “off-the-clock” work, and alleged failure to pay for training time.

Protecting the Business

Thankfully, hospitality owners and companies can take definite and immediate steps to mitigate against the risk that alleged wage and hour violations present. The DOL’s most recent study, and the agency’s redoubled enforcement efforts, reinforce the need for companies in the hospitality industry to evaluate their pay practices in an effort to mitigate against the risk of both regulatory and litigation threats.

Hospitality companies should consider a wage and hour audit to identify compliance challenges before they become fodder for the DOL or class and collective action litigation. Wage and hour audits can examine a wide array of pay practices, including worker classifications (exempt vs. non-exempt; independent contractor vs. employee; intern vs. employee; etc.), exposure from off-the-clock work, review of neutral pay practices, and address whether current policies and practices comply with federal, state and local legal frameworks. Depending on the outcome of these audits, companies can then take the steps necessary to address their specific risks.

As evidenced by the DOL’s most recent report, the DOL remains focused on alleged wage and hour violations in the hospitality industry. Whether a hotel, bar, restaurant or food service company, be sure that hospitality industry related pay practices and policies likely will continue to be scrutinized, not just by the DOL, but also your employees backed by plaintiffs’ law firms. Failure to address the inherent risks could spell headaches from both a regulatory and litigation standpoint, along with the attendant financial risk.

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Oregon, the state with the second-highest minimum wage in the country, announced last week that it will raise its minimum wage to $9.10 in 2014.  It’s in good company: Oregon’s neighbor to the north just announced that Washington will raise its state minimum wage to $9.32 (the highest in the nation), and Oregon’s neighbor to the south just enacted a law that will hike California’s minimum wage to $10 per hour over the next three years in one dollar increments – from $8 to $9 on July 1, 2014, then to $10 on January 1, 2016.

The current federal minimum wage is just $7.25 per hour, but at least 19 states and the District have set a higher wage for workers.  Nine of these states (Oregon and Washington among them) have indexed their rates to inflation, such that the rate is revisited every year to keep pace with changes to the economy.

Certain cities have set minimum wage even higher than the state minimum wage.  San Francisco, for example, currently has the nation’s highest minimum wage of $10.50 per hour.  Meanwhile, the City of SeaTac, Washington will have a unique $15 minimum wage initiative on its ballot this November.  Known as Proposition 1, this union-sponsored initiative singles out hospitality and transportation employers within the City of SeaTac (home of Sea-Tac Airport).

Numerous state legislatures across the country have also been introducing bills to raise their minimum wages.  These wage hikes come amid a national debate over whether minimum wage workers should be paid more – what advocates have called a “living wage.”  There’s little consensus: economists disagree on the effects of raising a minimum wage and the issue is politically divisive.  Some contend that increasing wages can improve the economy for everyone by increasing the demand for goods and services because those that work would spend more if they had money in their pockets.  Others argue that raising wages by government mandate leads businesses to cut jobs and reduce employees’ hours, effectively hurting the workers who were supposed to benefit from the increased wages.  As the debate continues, it is unclear what other states – or even the federal government – will do in the future. Stay tuned for updates on significant changes.