CloudPay: The Relationship Between Earned Wage Access And Employee Wellbeing With David Barak

Music:  00:00

This is RecruitingDaily’s Recruiting live podcast, where we look at the strategies behind the world’s best talent acquisition teams. We talk recruiting, sourcing and talent acquisition. Each week, we take one over complicated topic and break it down so that your three-year-old can understand it. Make sense? Are you ready to take your game to the next level? You’re at the right spot. You’re now entering the mind of a hustler. Here’s your host William Tincup.

William:  00:33

Please jump in. This is William Tincup. You’re listening to the RecruitingDaily podcast. Today, we have David on from CloudPay. Oh, you’re talking about the relationship between earned wages, access and employee wellbeing. And so what is that relationship between those two things? And David’s an expert in these things and in global payroll in general because that’s what CloudPay does. But we’re going to let him tell us that. So David, would you do us a favor and introduce both yourself and introduce CloudPay?

David:  01:07

Absolutely. I’m happy to be here. So I’m David Barack. I’m the CMO at CloudPay. I’ve been with the company for a little bit over five years now. And CloudPay is a company that, for some 25 years, has really focused on helping companies pay their employees across the globe. And we do that across 130 countries. And we also help deliver the actual payments to those employees. Right? I think that’s one of the most important relationships an employee has with their employers, making sure they get paid for the work they do. And it wasn’t until about a year ago that we really started to see an uptick in demand for pay flexibility. And this was a demand that was starting out in the US. When you see a number of organizations that are satisfying or trying to satisfy the need, it’s often referred to as on-demand pay, here in the US, but we saw a global need.

David:  02:07

I think some of it had to do with the pandemic. I think some of it just had to do with the fact that we were all kind of taught as organizational leaders, to start to be a little more in-tune with the financial wellbeing and mental wellbeing of our employees. And I think that opened up the discussion around, well, what is this relationship between when you get paid and how you get paid and your financial wellbeing and your mental wellbeing and your overall health? So CloudPay got into that space about a year ago and that’s what I’m excited to talk to you about. I think there’s a lot of macro dynamics that are global, that are really driving this change between how we reimburse our employees for the labor, when we do it and what relationship that has on their wellbeing, but also organizational wellbeing. Right? You think about like, your speed to recruit the quality of candidates you get, the global battle for talent these days, all of those things have a relationship to pay. And we’re really starting to explore that as an organization.

William:  03:17

I love that. So what I love about is the global nature of it because inside the four walls of the US, it’s interesting that people can both in an hourly setting, but also you can start seeing it creep into kind of corporate setting that if they’ve worked, so many days in a week, they can tab out and they can get, they have access to that money, which gets people away from kind of payday loans and some of this other kind of predatory type stuff, where they just need to make, they need to make some bills.

William:  03:52

And they can’t wait until their paycheck. That happens two weeks from now. And so I love that, but I also love because you know what y’all do globally. It’s nice to see that. It’s not just within the four walls of United States. If you need to do this in Brazil, you can also do this in Brazil, which is, I don’t, that’s just for example. But you can do this elsewhere. So I love the freedom for employees, to be able to have access to that. I love that. And I love that you’re tying it back to, not just financial wellness, et cetera, but mental health and employee wellbeing and how finance money stresses people out.

David:  04:39

Yeah. I think it was an EY, maybe a PWC study that said that three in four people with financial difficulties end up suffering some material health deterioration. Right? And I think it’s really kind of brought to the forefront, this relationship between pay, frustration, surprise bills. I mean, think about when the pandemic started, a lot of us had to move into our home offices. Not all of us were equipped with a desk, a chair, and all of the things you need to be able to focus on work. And it wasn’t for a while before organizations decided where they were we’re going to provide any stipends or help individuals build offices at home in some way. Right?

David:  05:27

So pay became a really important thing because how am I going to pay for all of these things, if my paycheck… and I coming back to this point of global. Globally, most companies pay their employees on a monthly basis. What happens between the fifth of the month and the 29th of the month that you are prepared for financially? So, I think the pandemic started these discussions already. I’m going to have to pay more for my internet, my air conditioning. If I’m in a country where that’s been a norm, I’m going to have to pay to equip my virtual office and all of those things you weren’t prepared for. So I think that brought this to the forefront.

William:  06:13

It’s interesting because we started-

David:  06:15

No, no. Go ahead.

William:  06:17

We were already tracking this. We were already kind of tracking in this direction slowly. But the pandemic kind of sped some of these things up because one of the things I love that you’re tackling is it’s the unknowns, right? It’s the emergencies, your car, the check engine light comes on and now you have no idea what that’s going to be, but it’s going to be something. And that creates-

David:  06:41

You never know what that light means, William. I can’t, every time-

William:  06:45

I just ignore it. And just, I assume that’s a fuse that’s gone bad. No, we’ll see how that goes. But those emergencies that come up, the unknowns, because most people can do a budget. And they have an idea of how much money comes in and they have an idea of how much goes out, because the problem is, there’s always something that they haven’t planned. It just happens. No matter how good you are at it, there’s just… That’s why savings and that’s why this earned access, having access to, helps people have access to the work they’ve already done. So the work’s already been consumed and they can then again, deal with the emergency, the stress of that emergency and remedy it and then adjust as they need to.

David:  07:44

Yeah. And it kind of like, this almost talks to the fundamental relationship between employees and employers, right? You’ve got to go back centuries to find a time when people got reimbursed for their pay immediately upon completing the work. For the better part of the last two centuries, you completed your work and then the employer determined how often you would get paid for it. Right? And of course, we’re not talking about the contractor that might come to your home and fix your stove or assemble some furniture. We’re talking about enterprise workforces where it’s almost set at a country level, right? The employee says, well in this country, we… or the employer says, “In this country, we would pay you once a month.” And you’re just supposed to be okay with that.

William:  08:33

Right.

David:  08:34

So I think that challenges that entire relationship and there’s a lot of money that sits in employer payroll accounts, that is not deployed in the economy. So there’re implications on the overall economy and the movement of money that even broadly adopted on-demand pay or wage access will have implications there, that I think are beneficial for both employee and employers. Right? If you’re selling services as an organization, if you can get more money out into the market that your employees and the employees of other organizations can use throughout the month, that’s beneficial for everyone. And-

William:  09:14

Oh, go ahead. No, finish your thought.

David:  09:15

Yeah. I was just going to say, when we started to get into this space at CloudPay, we really faced two big objections.

William:  09:23

That’s where I was going. I was going to ask you about the reluctance.

David:  09:26

Yeah. And the reluctance first is on the US versus the globe. I think there’s been adoption here in the US of this. And the question is always, “Well, is there really a global need?” And I think the pandemic’s kind of answered that question for us in some ways. But I think the second question, and I bet we’re all almost trying to think this way is when we talk about accessing your wages ahead of pay day, we’re probably imagining a person that’s either not that good with their money or is maybe a low wage earner. Right? You kind of assume that it caters to a specific subset of the employee population. And we started to see that. This isn’t just about, “Can I pay for an emergency?”

William:  10:16

Right.

David:  10:17

It’s actually, how much control do I have over my pain? Because, maybe why is it that the employer gets to set that? And why can’t I, generation Z millennials, generation Y, thinking about that on-demand economy that they’ve grown up in, why am I not the ones? Even if I’m making six figure salaries, not the one deciding when I get paid. So, employee pay flexibility, I think is universal. It doesn’t matter what side of the income scale you’re on or what part of the globe you’re on. It’s about taking back that control. And again, from an employer’s perspective, that is a powerful benefit. If you think about the recruiting opportunities there, if you think about the opportunities to retain talent longterm, if you’re a company that gives people that kind of flexibility and your employees in Belgium can now decide that they want to get paid on every other Thursday, because that’s how they’ve set up their bill pay.

David:  11:29

Or maybe that’s how they’ve set up their money movement or investment strategy. If they’re now going to decide to move somewhere else, that employer better have something just like that in order for them to take them from you, because this is going to be one of those benefits that everyone uses. I have through my company portal, the ability to go buy, I don’t know, movie tickets at 20% off. How often am I using that? How often are people using those kinds of benefits that organizations spend a lot of time developing versus a benefit like this, where it impacts their day to day.

William:  12:04

It’s interesting that you talk about the power and control and there was at one point, discussions around employers using the float, using basically the money. Work’s being done. We’ll pay you later, as a way to float both the business, but also maybe even make money on that money. I don’t see that as much. I don’t see as many articles about that part of it. I’ll see more articles about the consumerization of this. And it’s funny the… Years ago I was in a Lyft and Cassie, “Yeah, I think this is going to be my last ride for the day.” I said, “Oh, that’s cool.” He goes, “Yeah, I’m just going to tab out.” I said, “Tab out.” “Tell me a little bit about that.” He’s like, “Well, I work for Uber and Lyft.” But Uber at the time, I think it’s since changed. But at the time Uber paid you on a weekly, like you could tab out at the end of the week. But Lyft, at that time, you could tab out at the end of a ride, like the rides done, click and money’s wired and it’s done.

William:  13:18

And I just found it fascinating that it’s like, “Okay.” “We’re consumerizing this for…” And we’re getting accustomed to it, both in our personal lives. And that’s going to be less bleeding over into our corporate lives, which again, I love how you framed up. People make the assumption that these are check to check, people that can’t balance a budget or they struggle with money and this, that, and the other. It’s like, “Yeah, yeah.” There’s going to be some of that, of course. But by and large, this is for everybody to then take control of how… Again, you’re working. You’re doing the work. It’s technically your money.

David:  14:05

That’s right. That’s right. And I think, when you start… like, I think it’s interesting, you raise this idea of flow upgrade because one of the things that we needed to start doing for companies, where we were coming in, put something like on-demand pay, you also don’t know which part of the organization is ideal for bringing that into the company.

William:  14:27

Right.

David:  14:28

Like you sell so many benefits where you bring so many benefits through the benefits and comp parts of the organization, but this one touches so many different elements. You can bring it in through the recruiting organization. You can bring it in through the payroll organization. You can bring it in through benefits as well. So we had to start doing ROI calculations for companies that first started to come us. And they had these questions of, “Well, my treasury team’s going to ask me, why should we forego this float?”

David:  14:59

Right. My payroll team’s going to ask me, “Well, why should we…” “Isn’t this going to make me process payroll more often?” Isn’t there a headache there, right? So we’ve got to kind of answer some of those questions for companies. But what was really interesting to me is when we ran some analysis on what happens when you hire people? Like, think about the number of people that accept a job offer and then have to start on a specific day, not because that’s when they want to start, but because that’s when you kick off your onboarding and payroll cycle. Right? So you’ve found the perfect person. You’ve got the talent lined up, you have a need, but now you’ve got to wait in a week and a half or two before they can start, maybe a month in certain countries, because you want it to align with your internal processes around pay.

David:  15:51

And then that person starts, and they’re like, “Well, you started three days before the payroll cutoff.” “So you’re actually going to have to wait a month and a half before your first paycheck.” That’s not an ideal experience for an employee, right? And it’s not a great situation for an employer, where maybe they can’t bring someone in as quickly as they want them to. So this is where on-demand pay and earned wage access can start to almost take your existing processes and immediately change them, immediately make them both more desirable for the employee and the hiring manager that wants that person to start for them right away. So it’s these kinds of applications and translating this to organizations that really start to get people to lean in and say, “You know what, tell me more about this,” because I was trying to see other use cases where this might help me recruit better, may help me retain better and do it on a global scale.

William:  16:49

Right, right. Again, that’s one of the benefits as you’re not just thinking about the four walls of the US. You’re thinking about talent, as we should all think about talent in a global way. And again, I think the air’s out of the bottle, on some level that as you do this, people are just going to come to expect it at, at whatever job. And if you don’t have that, you’re at a disadvantage on the recruiting side. I loved how you framed up. Also the retention part, there’s engagement, that’s thrown in there, but also, people that like this model of, “You know what? I don’t have to wait two weeks.” “I don’t have to wait a month,” like in certain countries. I don’t have to wait a whole month and it’s not about an emergency.

William:  17:37

Like you said, it’s not about some type of headache or something like that. It’s just, I want access to the money, which I love. Let’s get back to the wellness side for just a second, because some of your customers are probably coming back to you with stories of how this is helping people, because it’s access to… Again, you’ve done the work, you have access to it. Okay. You can do it. You can configure it in a way that you want to, whatever that means. The relationship between that and mental health and wellness, financial wellness and wellbeing as we phrased it. What are some of the stories that you’re hearing from your customers around wellbeing?

David:  18:24

Yeah. I think it’s been fascinating when you think broadly about the wellbeing stack. So I think there’s an analyst in this space who talks about the entire wellbeing stack that organizations need to engage with, whether that’s fitness, nutrition, sleep management and then financial wellbeing and education fall into that. We’re hearing just fantastic stories about HR managers or CHRs, hearing from their staff about how someone was able to make a payment without having to turn to a payday lender, about how someone who used to borrow money from their parents in the middle of the month and then pay them at the end of the month, no longer has to do that. And these are touching stories because they’re impacting… I mean, most of the stories we’ve been hearing so far around younger employees that are kind of recently joining the workforce, they’re also the most likely to adopt these tools.

David:  19:30

And it’s one thing to deploy it. Are your employees going to then use it as well? So it’s these stories of… even things like paying off my student loan debt a little bit earlier every month, right? Instead of making 12 payments a year, can I make 14 or 16 to reduce the interest that I carry overall? So it’s these kinds of stories that are starting to come to us. And you’re kind of like, “Wow, we didn’t even think of these solutions or these use cases,” but there are wonderful examples where I think the relationship between the employer and employee can get tighter, right?

David:  20:11

You can create that culture of, we care about your wellbeing. And I think it’s… We’ve seen this in a couple places, even in our own staff. Generation Y is often asking, “What can this brand do for me?” Right. It’s not just, I’ve come here and I’m going to do this work and get paid. It’s what can this brand do for me overall, for my brand, for my wellbeing, for my financial health. And organizations that are adopting platforms like this on-demand pay, earned wage access are starting to answer this question in a way that’s far more intimate and form more personal.

William:  20:57

It’s interesting, as you talked about the student loans thing, I was thinking about finance charges on credit cards and things like that, or mortgages, whatever. There’s always a late fee on every, pretty much everything, right? And again, this is some of this is about managing money, but some of this is, if you have access, then you can avoid some of those finance charges, which ultimately brings money back to you. Money that you would have paid in some type of fee, you don’t have to pay those fees because you have access, which I find… Again, I think that gets to stress, which is directly linked to wellbeing, right? So if we can somehow mitigate the financial stress that folks go through, then they’re going to live healthier. They’re going to feel better and they’re going to probably, even perform better. I mean, that’ll be, probably something we have to study, but it’ll be really interesting to see how that shows up elsewhere.

David:  22:00

Yeah. And I think, we have one major brand that rolled this out across 18 countries in Europe. And they have some staff that are hourly workers that come in and they kind of, they get paid at the end of the week. But they’ve got this really strong relationship between hours worked and pay. So this brand has at times… I think, we’ve heard stories of staff shortages, right? These exist all over the globe. So at times, they’ve had to outline an opportunity for overtime. So they would say, “Hey, there’s an overtime opportunity this Saturday or this Friday evening,” depending on the country and the shift. And in the past, they’ve had a hard time getting people to sign up.

William:  22:48

Right. Because I won’t see that money for two weeks.

David:  22:50

Yeah. And you also don’t see-

William:  22:50

For a month.

David:  22:53

For a month. And you also don’t have that direct connection to… If I work these overtime hours and I’m not saying you should be looking for overtime hours. It’s just one of the stories we’re hearing. I know I’m going to be able to collect that pay the next day and I know my overtime pays 1.5 times what my normal pay is, right? So now their overtime sign-ups are much higher and they’ve got… They obviously need to fix the staff shortage problem that they have. But they are creating this direct relationship between pay and hours worked for some of the individuals and also helping them out directly by saying, “Here’s that pay you wanted,” whenever it’s requested. So, there’s this direct implications there that we’re starting to see them quite interesting.

William:  23:39

And it’s not just a new way of work that we’ve creating or we’re creating new expectation, which are wonderful. I mean, there’s so many benefits. Yeah. There’s probably some, for those that can’t manage their money really, really well. Yeah. There might be some downsides, but the upsides for the majority of the people that you deal with. And again, I love that y’all are tackling this from a global perspective.

David:  24:06

But you know-

William:  24:09

Go ahead.

David:  24:09

No, no. Go ahead.

William:  24:12

But I love that you’re tackling, and again, looking across countries, like you said with your example of 18 countries, there’s different laws, there’s different employment laws and payroll laws and all the payroll things that have to go on. But at the end of the day, if they want access to it, they have access to it, which I love. And I just think, once we go further down that path, fast forward two or three years, that’s just going to be normal. Like you’re going to normally… You’re a part of normalizing that.

David:  24:46

I think so. I think this is, in long-term this will change even the payroll organization at companies. Right? I think there are some countries where payroll teams are processing payroll on a weekly basis. And on the one hand, it’s great because those employees are getting paid more frequently. On the other hand, you’re running a process four times that, it’s pretty challenging. Running payroll is not an easy thing.

William:  25:13

And you can’t mess it up.

David:  25:15

You can’t mess it up, right? There is zero room for error. So you can even see how this would… Why are you processing payroll weekly? What if you just gave your employees the ability to decide when they want their money? And then you process it as frequently as that country’s regulatory bodies require, which might be quarterly for tax purposes, whatever it is. So I think, there’s a lot of ways that I think this will ultimately change the process. But I want to come back to something you said around, our employees going to know how to use this. Because I think one thing we found as we started to sell this, organization [C. CHARLES 00:25:58] were coming to us and they had those fears of, “Well, am I going to have my employees come to me at the end of the month now and say, ‘Oh, I shouldn’t have taken all this money out because I can’t make my monthly payments now?'”

David:  26:10

So we quickly saw an opportunity and a reason to introduce financial literacy and budgeting-

William:  26:16

Smart.

David:  26:17

And so I think for organizations that are thinking of deploying on-demand pay, you can’t just put out a tool and tell your employees, “Here you go.” “Decide how you want to use it.” You have to, and you have to almost embed financial literacy in there because it’s so new. It took so many of us a decade to learn how to use credit cards, right? We weren’t necessarily very good with it in high school. The time we got to, a little bit after college, maybe we figured it out. This is going to take time. And I think it’s another way that employers can invest in their employees and show that they care by saying, “Here’s some embedded tools for.” How to make sure you use this flexibility to your advantage and not to your detriment?

William:  27:01

Well, and you’ve just, you closed the loop because that financial literacy gets back to the wellbeing because they’re getting smarter. They understand fundamentally, like we’re not taught personal finance and middle school or high school. So this is just wonderful. David, as always, I love talking with you. Great topic and thanks for coming on the RecruitingDaily podcast.

David:  27:27

This was fun. Thank you very much.

William:  27:28

Absolutely. And thanks for everyone listening to the RecruitingDaily podcast, until next time.

Music:  27:34

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