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Strategy

"We've Leapfrogged Into The Future Of Work": A Q&A With ADP's Belinda Reany


Belinda Reany, DVP/GM of payments at ADP, shares how today’s executives should be thinking about the future of pay and compliance and how to support their low-income workers.

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FEI Daily: The company is doing a lot around lower income employees. Tell me about those initiatives.

Belinda Reany: We still have 40 million Americans living in poverty. And that's an astounding number to me. And even more live paycheck to paycheck. You still have a lot of people that are unbanked or underbanked. And that limits their easy access to basic financial options that those of us on this call probably take for granted. Affordable credit, online purchases, and all of those things result in friction.

Our research showed and the Fed actually released some stats, that this demographic pays about $1,000 to $1,200 a year in cash, checking fees, late fees, overdraft fees, payday loan fees, et cetera. And as a result of that, they often work multiple jobs just so that they can make ends meet. With what is happening in the world today, it leads to some urgency around advancing not just the way in which people get paid, but how often they get paid or how they can access their own pay outside of the regular traditional two week pay cycle.

There's also the generational piece to this whole thing. Millennials and Gen Z are driving a lot of the on-demand pay or getting paid whenever I want. Because those generations and their perspective of money and how they live their lives is just so different to the generations before them.

I always use this example: Imagine a sleep deprived couple, who just became parents for the first time. And they finally get the opportunity to go out on a date night and they arrange a babysitter. They order a Lyft driver to pick them up. They go to the movie theater, they book their tickets online in advance. They've already paid for their popcorn using the theater’s app. You skip the line when you get to the cinema, you watch your movie. Then you might say to your hubby, ‘Hey, our babysitter's not supposed to go yet, let's go for a drink or two.’ And you hop in another Lyft to get to the bar, buy your drink. You come home, you pay the Lyft driver and you pay your babysitter with Venmo.

You've made like several financial transactions without touching money, or a credit card, or a debit card. You’ve done it all digitally. And that is just how these people live their lives.

More than half of Millennials and Gen Xs have said that they would accept a more nontraditional methods of payment, if their employer offered that. 28 million people in America still get paid by check every month. Now we have the pandemic. Before it was an inconvenience because people had to get to a cash checking store. They had to pay quite a bit of money to have that check cashed. And then they had to have the security of carrying that cash around. And now add the health risk.

Two types of models are starting to form. One is real-time, continuous calc payroll where employers have the working capital to run and fund payroll whenever they want. And if you have that software in place, then you can obviously run on the month payroll. If somebody wants to take money three days before payday and their employer is comfortable with that then you could run that.

The other model that is more prevalent today is the third-party model, or the early earned wage access. And the earned wage access or early access to earned wages is where the hourly paid workers, even monthly paid workers, typically lower income or living paycheck to paycheck, have an unexpected emergency outside of the pay cycle. The fintech companies provide the capital and takes the financial risk of providing early access to earned but unpaid wages.

For the real-time continuous model, you have to do tax and deductions, remittances. You have to produce a compliance-based statement. It's considered compliance payment of wages. The second model, the early access to earned wages where a partner typically subs the money not the employer and the partner takes the financial risk, that is not seen as payment of wages. That happens after next pay is remitted. The paying that back is not part of the payroll process. In that model, oftentimes employers don't even have to do anything. This need to access money early, whether it's the real-time on demand for certain industries that it fits well like the Uber and Lyft drivers, or whether it's low income workers who have an emergency, we at ADP feel that we have a responsibility to develop solutions that will provide greater financial opportunities for workers. We are exploring a number of new systems through which workers will be able to access their earned wages early before the next pay day. And we've had dozens of meetings in the last 12 months with regulators, legislators, and customer advocacy organizations to explore how these programs should be designed and overseen for the benefit of consumers.

FEI Daily: You mentioned that a lot of the changes that you're seeing in the space are resulting from generational shifts. How do you see the pandemic changing the way that we are thinking about payments today, and how do you see it further changing in the future?

Reany: These changes that we've seen the last few months have been incredibly swift. When this event started unfolding we, like most companies, first and foremost focused on the safety of our associates and then, of course, of our clients.

We took quick action to ensure that all of our associates could work from home and still provide our clients and partners with the support they needed. Because we have an obligation to ensure that 40 million workers around the world still got paid on time. People not only want to, but they need to get paid on time.

We've seen businesses around the world transform their organizations practically overnight. The whole event has many of us rethinking the way in which we work, especially as some economies start opening and start thinking about returning to work places. Many businesses and their workers are trying to keep up with the emerging realities of the situation. Some are retraining and redeploying workers to adapt to this current environment that are we in.

With the weight of the recovery regulations that we’re seeing in the US specifically, including the Paycheck Protection Program, businesses are having to navigate unprecedented territory. And it's led to a greater need for expertise in pay, as well as compliance.

FEI Daily: What will all of these changes will mean for senior-level financial executives?

Reany: These emerging realities that we’re facing right now are accelerating the pace of change. It's redefining the future of work. And, so, the senior executives need to wrap their head around the fact that the future of work is forever changed now that we all suddenly had to enable remote work. The future of work, office space, your call centers, how they operate, we've leapfrogged into the future of work.

We've seen greater focus on the financial realities that people are facing and shifting priorities that are having a profound impact on businesses. Executives have to think about the low-income workers. People still getting paid by check, business processes that are still paper and not digital.