If your business is experiencing high churn with gig workers (i.e., temporary workers, independent contractors, freelancers), it could be because you’re not paying them fast enough. Today, offering the option of instant, real-time payments is essential in maintaining a strong relationship with gig workers and ultimately, prevent them from leaving for your competition.
Ahead, we’ll cover why slow gig worker payment methods might cause friction and why a faster option like real-time payments can keep gig workers engaged and motivated.
Why do folks turn to gig work?
To say that the gig economy is on the rise is putting it lightly. Thirty six percent of workers in the U.S. participate in the gig economy either to supplement their primary source of income or through full-time engagement — and the number of gig workers is increasing three times faster than the whole of the U.S. workforce.
Gig workers turn to freelance work for many reasons, including supplemental income, flexible scheduling, and a better work-life balance. Gig work allows for travel without having to fill out PTO requests, creates an opportunity for family engagement while working from home, and it provides professional fulfillment while completing projects that align with interests and passions. If given a choice, 63% of freelancers say they’d prefer freelancing over a traditional job.
The challenge of slow gig worker payments
But despite these quality-of-life benefits to a gig worker, the need to become viable or sustain viability is at the top of every gig worker’s mind. Getting paid matters, and getting paid regularly, dependably and without delay can be the difference between day-to-day expenses and being able to plan for larger purchases like a first home or professional development courses.
Not paying your gig workers quickly could sour the relationship and leave them looking for work elsewhere.
How do gig economy workers get paid?
Back in 2018, as gig work was beginning to grow, 51% of gig workers preferred to be paid via a service like PayPal. Over the last few years, similar payment gateway services like Venmo and Zelle have joined that mix as more banks become connected to those networks.
Recommended reading: How to pay 1099 employees
Challenges of using PayPal for gig worker payments
Gig workers enjoy these platforms because P2P (peer-to-peer) services are familiar and provide faster access to payments than checks, for example. But payment gateways are not bank accounts. Unless a payment can be made directly from the payment gateway — like using PayPal to make an online purchase — a gig worker has to transfer their funds to a bank account. These transfers can take up to three business days; a timeline that’s delayed by weekends and holidays. For a gig worker that has time-sensitive bills to pay like rent or utilities, these delays are not sustainable.
PayPal fees also add up. To send or receive money for goods and services, gig workers are subject to 2.89%+$.49 (for USD). The rate increases an additional 1.5% for international transactions. Then, once received through PayPal, a gig worker’s funds may be subject to fees for transferring those funds to their bank account. Instant transfers out of PayPal are subject to a 1.5% fee.
Making gig worker payments faster with real-time payments
Offering a better payment experience will help keep your gig workers happy and engaged – and help prevent churn. For gig workers, a better payment experience means faster payments. And this can be especially important during the uncertain economic times that lie ahead. According to the Federal Reserve, 58% of gig workers would not be able to cover an unexpected $400 cost. Having a faster payment option could offer peace of mind by covering these expenses quickly when needed.
What are real-time payments?
Real-time payments are an instant direct-to-bank payment method that gives gig workers immediate access to their hard-earned money. They receive payments 24/7 — including weekends and holidays — and those funds are available for use right away.
Not every bank accepts real-time payments, however, but they are widely accepted by 61% of U.S. banks, including most major banks with adoption increasing each day.
How do real-time payments work?
Real-time payments are credit transfers. This means that payments are pushed from the sender’s account into the recipient’s account. The amount needed to complete the transaction is verified before the transaction is initiated, which prevents any failed or delayed payments.
Suggested reading: How gig economies can stay ahead of tax season
There are three steps in a real-time payment transfer, and once the payment is initiated, the payment settles right away.
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Initiate the payment with your bank. Confirm that your bank offers real-time payments and ensure that your account contains sufficient funds for the transfer. To initiate the payment, you’ll need to provide payment details about your gig worker, including their bank account and routing number.
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Your bank sends the payment request to the RTP® network. The RTP® network notifies your gig worker’s bank about the incoming transfer. The transaction details are secure and encrypted.
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The payment is settled. Funds are accepted by the receiving bank and become instantly available to your gig worker.
Benefits of using real-time payments for gig worker payments
Real-time payments offer your gig workers an exceptional payment experience in several different ways.
No back-and-forth communication about payment status
Getting paid instantly means that gig workers don’t have to track when their payments are coming, and they don’t have to check-in with you if a payment is late. RTP gives gig workers instant access to their money, and they’ll get a notification letting them know as soon as it happens.
No new accounts for gig workers to manage
Getting paid directly into a bank account means there are no additional passwords and usernames to manage or programs to learn.
Competitive advantage for your business
Instant payments are the best option to gain an advantage over competing gig platforms and other businesses that may be offering slower payment methods.
Increased worker motivation
According to a survey by MasterCard, 85% of gig workers would work more if they were paid faster. By maintaining a good relationship with your gig workers through faster payments, you’ll motivate them to stick around, and they may spread the word and tell their friends, which can lead to growth for your business.
Using Routable to send real-time gig worker payments
Offer your gig workers the best-in-class experience using RTP with Routable.
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Improve operations. Gain immediate leverage over competitors with instant payments and enjoy faster AP cycles with a 24/7/365 payment option.
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Ease finance team workload. Instant payments eliminate the back-and-forth of payment status communications and provide remittance information within transaction details, freeing finance teams up for more strategic tasks and faster invoice reconciliation.
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Scale as you grow. Routable meets your needs of the moment with accounting software integrations (including real-time two-way syncing) and stays with you as you grow with dynamic APIs. Whether you’re at 500 gig workers or ready to onboard 10,000, we help you meet your goals.
Learn more about making faster gig worker payments with Routable.