Earned Wage Access

Why biweekly pay doesn’t work for employees or employers

Biweekly pay doesn't work for the millions of American workers constantly distracted by financial stress. That distraction costs employers billions, too. Learn why, and how you can fix the shortcomings of biweekly pay without changing how your payroll works.
Graphic showing how unpredictable expenses make biweekly pay stressful for employees

The U.S. Bureau of Labor Statistics reports that 43% of employers offer biweekly pay while 33% pay weekly. That doesn’t mean 43% of Americans get paid every two weeks while 33% enjoy weekly pay. Not even close.

The larger the employer, the more likely they are to use a biweekly pay schedule. Companies with 10–19 employees offer weekly pay the most frequently at 37.5%, but the number trends downward from there. Once companies have 1,000 employees or more, they only offer weekly pay 22% of the time. That leaves more than 70% of large businesses paying employees biweekly.

Chart showing what percentage of businesses pay weekly, biweekly, semimonthly, and monthly based on U.S. Bureau of Labor Statistics data

Why’s biweekly pay a problem? Because what’s bad for employees sooner or later becomes bad for employers. Financial stress is distracting the majority of workers. According to the Financial Health Network, 67% of Americans are financially vulnerable or coping.

The longer employees wait for their wages, the less control they have over their finances — and the harder it becomes to escape living paycheck to paycheck. But that’s not the only reason biweekly pay is broken.

1. Biweekly pay takes interest-free loans from your employees

Employees’ financial stress costs businesses like yours $250B in lost productivity each year. Much of that stress comes from employees worrying about covering their fixed expenses. It’s not just low-wage hourly workers, either. One in three employees runs out of money before payday, including those earning more than $100,000 per year.

That begs a question. Which would have more impact on your bottom line — the gains in productivity from relieving employees’ financial stress, or holding onto their wages so you can make money on the float? That is, investing wages somewhere until they’re paid, like a commercial bank account or money market fund.

Employee financial stress costs businesses $250B in lost productivity each year.

The math shows that holding employees’ earned wages is far more likely to create a net negative. Here’s a simplified example for a company with 1,000 workers:

  • 1,000 workers x ($13 x 160 hours) = $2,080,000 in earned wages each month
  • Company maintains $3M in operating reserves to cover wages each month
  • $3M x 0.2% = $6,000 in monthly interest from employees’ earned, unpaid wages

What that extra $6,000 does for your business each month likely isn’t much, at least compared to the impact of letting employees access their wages early instead. Consider that the cost of necessities has risen nonstop since 1980, including a 4X increase in medical expenses.

Graphic showing how increases to fixed expenses since 1980 have made biweekly pay more stressful for employees

On top of that, overdraft fees have hit record highs, increasing more than 50% since the late 1990s.

Chart showing how bank overdraft fees have increased to record levels since 1998

Biweekly pay takes interest-free loans from your employees at their most vulnerable moments. And no, their stress isn’t because of common money struggle myths, such as some employees just lack discipline. On the contrary, your employees are constantly battling unstable financial situations. Meanwhile, the billion-dollar payday loan industry sits back and smiles.

2. Biweekly pay makes your employees more likely to use predatory lenders

Payday loans are a great example of how your employees’ problems are your problems. Payday loans eat away at your bottom line. So do high-interest credit cards.

Short-term credit products don’t solve your employees’ financial stress. They just prolong it. American workers lose $240B each year by making ends meet through predatory lenders. Meanwhile, you’re no closer to recovering your share of the $250B in lost productivity each year due to employees being distracted by financial stress. Notice how close those numbers are.

American workers lose $240B each year by making ends meet through predatory lenders.

But why are they turning to predatory lenders in the first place? According to the Federal Reserve, 40% of Americans can’t cover a $400 emergency. That’s in addition to the nearly 33% of Americans who routinely run out of money before payday. When that happens, solutions like high-interest credit cards are bad enough. Payday loans are worse, averaging around 400% interest.

That’s grim news for the 78% of Americans who live paycheck to paycheck. Biweekly pay puts employees in a position where they have to borrow money when they need help covering bills and emergencies. That’s despite employers sitting on wages employees have already earned.

It would be far better to offer a solution like earned wage access (EWA), also known as on-demand pay, or an emergency savings benefit, so employees can solve cash crunches with their own money.

Without solutions like that, employees do more than face distraction from financial stress. They also can’t build the financial resilience needed to adopt benefits that would help them over the long term, such as health savings accounts (HSAs) and 401(k) plans.

3. Biweekly pay creates a competitive disadvantage in recruiting and retention

Biweekly pay is a liability in the post-pandemic world. Labor shortages following COVID-19, plus rapid advances in financial technology like on-demand pay, mean employees can flow to jobs with the best benefits.

It’s become so easy for employees to pivot jobs that many industries suddenly have new competition for talent. Take manufacturing, projected to face up to $1T in lost productivity by 2030 due to worker shortages. The story of Roger Dixon from Akron, Ohio shows why. He left a manufacturing job to work at a food snack company for $3.50 more per hour.

But trends like these are about more than money. They’re also about access to money, specifically earned but unpaid wages. More than 70% of employees want to access their money ahead of payday, but only 6% work somewhere that offers on-demand pay. Businesses are taking notice, too. Gartner expects 20% of businesses will offer earned wage access by 2023.

The takeaway: It’s not necessarily about paying employees more, but giving them more control over their money. You can create a competitive advantage for recruiting and retention simply by making pay more accessible with solutions like Even.

4. Biweekly pay makes employers look out of touch with employees

It’s not just a hyper-competitive labor market that’s pushing companies to offer new benefits. It’s also that financial solutions like on-demand pay can now launch in just days. That makes it increasingly difficult for employers to justify not giving employees early access to their earned wages.

Biweekly pay makes most employees wait three weeks or longer for their first paycheck. That’s a lost opportunity. Imagine how much stronger your employer brand would be by allowing employees to access their pay on the first day. It’s why businesses like Noodles & Company offer financial wellness packages that include instant pay.

Chart showing why most new employees wait three weeks or longer for the first paycheck

Starting a new job should be exciting, but for many employees it’s stressful because it often means waiting three weeks (or longer) for their first paycheck. Meanwhile, fixed and unexpected expenses compound.

What’s more, you can launch on-demand pay in days, all without changing how your payroll works. Here’s how Even helps you do it:

  1. Our field engineering team integrates the Even platform with your human resource information system (HRIS), human capital management (HCM) solution, and payroll software. No downtime or dev help required on your side.
  2. Employees access their wages through the Even app, where they can see wages calculated in real time based on their schedules. They also use the app to request on-demand pay. Members can access wages early twice per pay period, totaling no more than 50% of what they’ve earned that period.
  3. The ability to draw pay early drives employees’ financial distraction down and their productivity up: 75% of Even users say the app has had a positive effect on their financial health, and more than 75% say Even makes them feel better about their employer.

In effect, Even lets your employees take more control over when and how they get paid, no matter if you pay weekly, biweekly, or semi-monthly.

Give employees control over when they get paid, starting on day one

By giving your employees on-demand pay, you give them early access to their wages without the need to transition from a biweekly pay schedule. That delivers the best of both worlds: Your employees get control of their money, and you give them that control without adding infrastructure or hiring a bigger payroll team.

What’s more, the ability to set up on-demand in just days means you can offer it as an emergency response benefit, or plan out a launch campaign for later. And because you bring all of your systems’ data to one place, you can launch even more financial benefits, such as automatic budgeting, employer-sponsored emergency savings, and even employer-matched debt relief.

Learn more about how on-demand pay can help you overcome the limitations of biweekly pay at Even.com.