Daily Payroll: 3 Benefits and 3 Disadvantages to Consider (2024)

What Is Daily Payroll?

Daily payroll is when businesses pay their employees on a daily basis. Employees are paid for the work they complete on the same day.

Should Businesses Pay Their Workers Every Day?

Daily payroll is the least common payroll frequency used by employers. Most companies pay their employees on a weekly, bi-weekly, semi-monthly, or monthly basis, as this allows more time to process payroll. It is more convenient for companies to pay employees less frequently. Just like any other payroll frequency, there are some benefits and disadvantages of a daily payroll. Here are some of those benefits and disadvantages.

Benefits of Daily Payroll

• Employees get paid more quickly. The biggest benefit of a daily payroll is that employees get paid faster! Instead of waiting for every other week, employees get paid at the end of the day after their work is completed. This is beneficial for employees who live paycheck to paycheck and can’t afford waiting to pay bills. According to Everee, 68% of Americans live paycheck to paycheck.
• Simplicity. Paying employees daily creates a simple payroll. While it does mean you have to run payroll more frequently, it is easier to calculate with only calculating hours and wages for one day. This can also help when you look for bookkeeping and payroll records. When you try to calculate how much an employee is paid for a single day, or how many hours they might have worked, you can find the paycheck for that day. You don’t have to spend time figuring out which pay period it was or go to the timesheet to add it up.
• Employee wellness. Employee wellness benefits, such as less financial stress and access to needed funds sooner, can come from paying employees daily. This can help with motivation or productivity for employees. Instead of looking forward to a pay date every other week, it’s payday every day!

Disadvantages of Daily Payroll

• Administrative costs. If a company is running a payroll every day, it’s going to cost more long-term. While the payroll is simpler and doesn’t take as long, the costs add up. It costs on average $1.50-$1.90 for each deposit for every employee. If you process a paycheck and deposit it into an employee’s account every day, costs can add up quickly.
• Lack of saving by employees. If an employee is getting paid every day, while it does give them access to funds quicker to pay bills, it can also be more difficult to save for larger expenses. While this is ultimately up to the employee and their ability to save, as an employer, you want to set up your employees for success as much as you can.
• Limits payroll system options. While there are some payroll systems that offer the daily option, such as ADP or Ceridian, not all do. Choosing to pay employees daily might require your company to change your payroll system. With limited options on what payroll systems can run payroll daily, you might need to select a payroll system that is not the best choice for your company.

Industries That Use Daily Payroll

Since daily payroll is not a commonly used payroll, you’ll find that jobs that do pay daily are more common in certain industries. Here are a few different industries that use daily payroll more often:

• Construction. A lot of construction jobs you will find vary on the length of a job. Many of the jobs can be daily jobs, which means employees will get paid on a daily payroll. This also might happen because an employee gets hired only for the day.
• Temporary staffing. Another common industry you will find that pays daily are temp staffing agencies that hire employees only for the day and assign them to one of their clients that needs someone to do work for them. The temporary staff might eventually get hired on directly by the client, but the temporary staffing agency will often process payroll on a daily basis.
• Delivery services. This is a more unique industry, but companies such as DoorDash or UberEats that pay their employees for making deliveries will run a daily payroll so those deliveries can be paid quickly. Their payroll system is going to look different than others, but ultimately will run a daily payroll.

Questions Companies Should Ask Before Offering Daily Payroll

Anytime you consider a new payroll frequency, do all the research you can to make sure it is the right fit for your company. As part of the research, ask important questions to determine if daily payroll is right for your company. Here are some questions you may want to consider.

How Much Will It Cost?

Since daily payroll is the most expensive payroll frequency, you need to ask yourself if the additional costs will be worth the added benefits for your company and employees. For small and mid-size businesses, additional payroll costs can be crushing. Some businesses can’t handle the additional costs. Choosing whether or not to offer daily payroll is a financial decision for your company.

Is It Really What Employees Want?

This seems like a question you would want to ask your employees. However, it is not one that should be brushed over. While it has been discussed how daily payroll can improve employee wellbeing or increase financial wellness, this may not be the case for your workforce. Maybe you have employees who enjoy getting the big paychecks every other week that are easier to budget. Maybe employees have an easier time predicting their wages when the paycheck is every other week as opposed to daily. Whatever the case may be, consider the impact it will have on your employees and whether it’s something they want. If you are unsure, ask for feedback through a survey.

How Will It Affect Commission Pay?

Every company pays commissions a little differently. When it comes to commissions, typically, the more sales you make, the more commissions you receive. If paying employees daily, how will commissions be paid out? Will it start over every day, or will you need to track it every day? Also, will the commissions be paid out on the day something’s booked, when the actual sale is made, or when the appointment occurs? Depending on how it is done, this can create more work for your payroll team to ensure that commissions are paid correctly. Depending on if your workforce is sales-dominant, consider how a daily payroll will impact commissions.

How to Get Started Paying Employees Daily

Any change to the frequency you pay your employees is a big change. It will affect every employee and the entire company. So be sure you are methodical in your process of getting started with daily payroll. Here are some steps to take.

Step 1: Implement the Payroll System

As was mentioned previously, not every payroll system has the capability for a daily payroll. So the first step is implementing a payroll system that has the ability to process daily payroll. Having a payroll system in place will help ensure you are being compliant and have the right payroll deductions in place for each employee’s paycheck. It will need to be a system that can be processed quickly at the end of the day after an employee has completed their work.

Step 2: Calculate the Number of Hourly and Salaried Employees

The next step is to determine how many employees are paid hourly and salary. Salary employees get paid the same amount every day as long as they work that day. Salary employees’ checks can be processed earlier in the day because their wages won’t be affected by the number of hours worked. For hourly employees, be sure to save enough time towards the end of the day to process their paychecks once you know how many hours they work.

Step 3: Calculate Net Pay and Pay Employees

Since you will only be calculating an employee’s pay for one day, this part is pretty straightforward. For salary employees, it is the same amount each time. For hourly employees, just multiply their hourly rate by the hours they worked that day. If it’s later in the week, be aware of the number of hours hourly employees worked that week, as they are still eligible for overtime. For over 40 hours in the week, you will need to pay overtime. After that has been calculated, you can process payroll through your payroll system and get your employees paid!

Tools to Help With Daily Payroll

Since daily payroll is less common than any other payroll frequency, it can be a little daunting to process. You don’t want to have issues paying employees correctly or have an event where an employee isn’t paid at all as that can put them in a bad position. Here are some tools to help with daily payroll to ensure your employees have a positive experience.

DailyPay

DailyPay is a software that gives your employees easier access to their earned wages. It is a tool that can be used by both employers and employees. Since daily payroll is uncommon and most companies are unfamiliar with it, DailyPay is a great tool to help the transition.

Budgeting Classes

One of the cons of daily payroll is how it can be difficult for employees to save for larger expenses. Offering budgeting classes to employees to help them budget correctly and handle daily paychecks is a great tool to help employees be more successful with daily payroll.

Clock In/Out Notifications

Daily clock in and out notifications are not often used, as usually a payroll team doesn’t want to be notified every time an employee clocks in or out. However, setting this up and utilizing it helps the payroll team know immediately when they can process an employee’s paycheck. This would mean the employee is getting paid quickly and the payroll team stays on top of when employees are done working for the day.

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