Instant paychecks pose moral dilemma for Yooz CFO

Yahoo

18 hours ago

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Yooz CFO John Gronen likes to keep an open mind when it comes to responding to employee requests for new services or benefits.
So, when some employees at the Dallas, Texas-based accounts payable software company asked for instant paycheck access, he researched the pros and cons — despite having some reservations about it leading down a slippery slope to overspending.
'There's an upside of having access to the money every day and there's a cost,' Gronen said in an interview, noting that he's currently leaning toward sticking with the 'old school' practice in which employees get paid once or twice a month.
Also known as earned wage access, since 2023 states have begun passing laws friendly to EWA service providers, although the industry has also sparked controversy because of fees associated with some services, CFO Dive sister publication Payments Dive reported.
To find out more about how the benefit is viewed, Gronen opted to add a question on EWA services to a recent survey the firm conducted. Yooz found just under a third (32%) of the roughly 1,000 workers queried across industries said they would prefer instant pay, while the majority (58%) preferred scheduled paydays, Yooz told CFO Dive.
Gronen himself isn't convinced it's a good idea, though he acknowledges there are some significant benefits to EWA services, because those using it can tap into their daily cash flow rather than credit cards.
'As a CFO you want to make sure you're doing the right thing for employees and kind of helping them not get into trouble,' Gronen said of EWA. 'There are a lot of benefits but the downsides scare me because some people get $1,000 or $100 today and they go spend it immediately and then when they get to the first of the month they no longer have money to pay the rent.'
A betting predicament
Gronen, who joined Yooz last year, faced a similar moral dilemma in his previous job as finance chief of Sightline Payments.
Back in 2021, the payments company weighed offering BNPL services to a sports betting company, before ultimately opting against it. 'I was massively opposed to it. If you're going to place a sports bet, you should have that cash in hand,' Gronen said. 'Casinos are in business because, generally speaking, [the person placing the bet] is going to lose. For me that outweighed the benefit of offering it for the company.'
For now, he is leaning toward not offering EWA, while still working with his human resources department to determine what it would take to implement in the U.S. Currently, Yooz has a staff of over 500 people and all the U.S. employees are paid twice monthly. He expects he would only offer the instant option to U.S. employees because of the tighter regulations that affect pay processes in Europe.
Next, he and HR will poll the staff to find out how many and what type of employees would truly want instant payments. He will also need to examine what the service would cost on the banking side as well as the cost of the time his team would need to take to offer the service.
Becoming material
While he declined to say how much it costs for each electronic paycheck delivered through the ACH network, in general, he said it is roughly $1.50 to $2.50 to process a single employee's paycheck. In addition to the transaction cost, there are also potential internal administrative costs that could come into play such as those related to commissions. For instance, there could be a cost related to someone on staff having to calculate commissions on a daily basis, he said.
'It starts to become material if you have a lot of employees,' Gronen said of instant payments, adding that Yooz has a staff of more than 500.
Given his worries, why is Gronen even considering EWA at all — not to mention that, should the service be implemented, he believes the company should eat the costs rather than charge the employees any fee for additional payment transactions?
The answer is a little self-serving, he acknowledges: spending and benefits that support employee satisfaction and are good for the bottom line.
'Employee turnover is one of the things that will keep you from growing your company,' Gronen said. 'It sets you back each time.'
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