Companies ‘Aid for Hourly Workers’ Income Stress

What should companies be doing to compete for hourly workers in today’s competitive market? Sabina Bhatia, Payactiv’s Chief Customer Officer, speaks with Linda Nazareth about why access to earned wages can ease employee financial stress.  Linda Nazareth is the host of The Work and the Future podcast, a show dedicated to trends shaping the future of work. 

Watch the full interview above or listen to the full interview below.

Linda Nazareth:

On this podcast I’ve spoken to a lot of people about work and careers, but one area I really haven’t explored is hourly workers, and the special stresses that hourly workers are under. People who get paid by the hour, as opposed to a salary, make up the majority of workers in the US and Canada, and in some cases that’s because of temporary circumstances. They’re teenagers, or working part-time to bring in the secondary income.

But in many cases it is a permanent circumstance. And as a group, they’re under a lot of financial stress, and that is relevant to the organizations who are trying to hire them. Because right now there’s a shortage of workers in many industries. We hear constantly it’s impossible to get labor in restaurants or stores, and wage hikes are not really doing it either.

So what is it that workers want, and what can we do to give it to them? Well, my guest today is Sabina Bhatia, she’s Chief Customer Officer of Payactiv. That’s a platform that gives workers earned wage access, or basically the right to get their earnings without a waiting period. I talked to her about that, but also about the broader question of financial stress for workers, and the issues around that. It was a really interesting discussion, it’s a subject I think we need to be talking about more, please stay with us.

As companies struggle to find hourly paid workers, what can companies do to attract them and keep them there? My guest today is Sabina Bhatia, she’s Chief Customer Officer at Payactiv, and she joins me to talk about the ways that companies can perhaps make incomes easier to access, and how that can help with financial stress, which is something that is plaguing workers across the board. Sabina, thank you so much for joining me.

Sabina Bhatia:

Linda, excited to be here, thank you so much for having me.

Linda Nazareth:

Well, there’s a lot to talk about in terms of hourly paid workers, and I have to say, it’s something I haven’t covered a whole lot on this podcast. We talk about a lot of issues, but I think it’s a segment that sometimes gets forgotten. But until we get to that, I’d like to just start by asking you about your own background, because it’s interesting, you didn’t start doing exactly what you’re doing now.

Sabina Bhatia:

Thank you for asking, and you are correct. So going back about 25, 30 years, actually, I spent about 20 years on Wall Street as a hedge fund analyst from New York. So within my heart I am a New Yorker, but I always had this one missing link which was the tech. I had the fin, but I didn’t have the tech. And I’ve always been fascinated with engineering and technology, and I thought the best way to learn more about it was really to work at a FinTech firm. 

2008 happened, and I think it was a great opportunity for me to explore the things I could do given my finance background. So I moved to California in 2015 to help build and grow Payactiv. So I’ve been here since the early days of Payactiv, I’ve held various roles at Payactiv, and today my role is primarily strategic customer relationships and experience. So that is really my background.

Linda Nazareth:

Was there a conscious decision to not want to work on Wall Street anymore? Or just to try something different?

Sabina Bhatia:

I think the conscious decision was I had a very strong finance background. I had worked on various financial instruments, going from equity, to convertible debt, to options, to derivatives, and I thought I could do even more with my knowledge. So I thought if I understood the technology side of things, I could use my financial knowledge for good.

Linda Nazareth:

Okay. Well, tell me a little bit about Payactiv. It’s a platform, correct?

Sabina Bhatia:

Correct. Payactiv was started about eight years back, our founder and CEO Safwan Shah invented a category called Earned Wage Access, you’ll sometimes see it referred to as EWA. But what earned wage access is, and Linda, it’s always easier to remember and understand using a story. 

So think about the hourly worker, and when I talk about the hourly worker, that is 44% of American workers that are employed in low wage jobs in the front line of industries. So think about that hourly worker that clocks in, works 7, 8, 9 hours, it’s never certain if they’re going to work eight hours like you and me, or is it going to be three hours, or is it going to be nine hours? But they come in, they clock in, they work their day, and then they clock out.

Now that hourly worker, who is usually making less than 20 an hour, they have to wait to get paid. So that is the crux of the problem, the lack of liquidity for this hourly worker while they’re waiting to get paid. We at Payactiv discovered that if we actually solved that liquidity issue for the hourly worker, it’s great for your people, it’s great for your business, and it’s definitely great for your community. 

So our platform, you can consider our platform is a technology platform that actually allows the worker to get access to their earned but unpaid wages, so they can get through their day to day expenses and focus more on work than their financial worries, which is obviously very good for the businesses.

Linda Nazareth:

Well we see these statistics, but it’s shocking how many people live paycheck to paycheck? In the US it’s 60 something percent, I believe, in some surveys.

Sabina Bhatia:

Actually, Harvard Business Review just came out with this number, and they said 44% of American workers are employed in low wage jobs at the front line of industries. The low wage is defined as approximately $20 per hour or less. So you have a large percentage of Americans in that state, and it becomes very, very expensive to be poor. And we’ll get into the details of why it is expensive to be poor, but that is a huge percentage of our population. We have to take care of that.

Linda Nazareth:

Well, just to get back on the paycheck to paycheck part of it though, I found the stat that I was looking for, it was 78% of Americans say they’re living paycheck to paycheck, and I was surprised that 9% of people who make six figures say they’re living paycheck to paycheck, because they spend a lot of money. Take us through what you’ve observed in terms of how people have to cope with this if you’re waiting for that check.

Sabina Bhatia:

Sure. So I’m glad you started with my history as to what I did in the past. I’ve been through the 2008 crisis, I know what that did, but I also saw a great bailout of a lot of banks that went through the 2008 crisis.

Now look at the hourly worker that is having a problem with liquidity off their earned income because of that two week pay cycle. So what does their life look like? Linda, you’re a second late and a penny short because a bill came through during the payroll period and you just did not have funds. What happens? You get dinged with an overdraft fee. But that is just one piece of the puzzle. Along with an overdraft fee comes a late fee, a disconnect fee, a reconnect fee, and that is just one fee that I’m talking about that makes up about 35 billion a year. If you actually put in all the other fees included, it’s about 200 billion a year paid by Americans that are forced to live paycheck to paycheck because of that lack of liquidity. No way can they save, no way can they be engaged at work, no way can they even show up at work sometimes because they don’t have liquidity for gas.

So that is really the state of the hourly worker. If you actually look back at the last couple of years during the pandemic, everybody talks about the vaccine, but there were actually two kinds of vaccines that were provided during the pandemic. One was your vaccine for COVID. But there was one other vaccine, and that vaccine was to solve the financial stress of our essential worker, of our hourly worker, and that was your $1,200 stimulus check. But if this continues, your overdraft fees, all these other predatory fees, how many stimulus checks are we going to get? So we have to solve the source of the problem, and the source of the problem is I come in today, I work today, I need to get paid today. So we believe it’s their right, if you’ve earned it and you need it, you should be able to access it.

Linda Nazareth:

Now you talked about the cost to workers who are trying to get to the next paycheck, you didn’t really mention the payday loan industry, but obviously this is what has sprung up to deal with this gap.

Sabina Bhatia:

Yes, exactly. And that is part of your 200 billion in fees. It’s unfortunate that they have to go to a payday loan place. A lot of payday loans have APRs of 300, 400%, but let’s not ignore the payday loan places that are online, or in states that don’t have any caps. A $200 access to funds might mean that the hourly worker has to pay thousands of dollars to return those funds. How does that solve the problem? We don’t want to say anything negative about what payday loans are doing, or what other institutions are doing, they are also solving a problem, we choose to solve the problem in a different way. Linda, what you do is important, but how you do it is even more important, and I would love to talk about our mission towards being a B Corp and conscious capitalism. We are trying to do it the right way.

Linda Nazareth:

Well, it’s a good time to have these discussions because for once it seems like hourly paid workers have a little bit of leverage. Pre-pandemic they were maybe ignored, beginning of the pandemic they were hit really hard, and now that there is hiring again, and it’s all over, I’m actually based in Canada, you’re in the US, but we’re seeing the same thing, lots of countries, there seem to be not enough workers. Now lots of theories on this, people have exited for different reasons, but I’m interested to hear yours. What happened to the workers that were supposed to be available that were there before the pandemic?

Sabina Bhatia:

So you’re correct, they have the power today to move the needle. But today our workforce is the gen Z, it is the gig workers, it is a combination of all of them that are looking for faster pay, more pay, and it has to be outcome based. They want instant gratification. If you actually look at the global population, about 1.2 billion people, that is almost a third of the global workforce, is working as freelancers. 59 people, or 36% of the workforce, considers themselves as freelancers in the US itself. Is it the Uber generation? I work today, I need to get paid today. But the other thing that is happening, and that is where we defined what essential workers is. When we thought about essential workers it was the healthcare workers, workers working for senior living, but the pandemic taught us that when you walked into a grocery store, when Amazon dropped off a package for you, could you survive through the pandemic without them? You could not, they are your essential workforce.

So the essential workforce is telling businesses that you would have a set of benefits for your salaried employees, and you had a different set of benefits for the hourly employees. That won’t do anymore. Your benefit structure has to be aligned across the organization. And that’s the dialogue we are having with organizations today. I speak to customers all day long every day, and sometimes seven days a week. They’re telling me, “Sabina, we would love to have a retention problem.” That made no sense to me. Their biggest problem today is recruiting.

Linda Nazareth:

Yes.

Sabina Bhatia:

So the relationship between a business and an hourly worker cannot just be transactional. You have to look at their needs outside of work. Today the two biggest needs are transportation and childcare, you cannot ignore that. If you ignore that they won’t show up at work. So organizations, we’ve been lucky to speak to so many organizations that have been so supportive. They understand their need, and they are stepping up to fulfill that need, hence one stop shop where you can provide not just a short term solution, but a long term solution for the financial wellness of not just your salaried workers, also obviously workers has become part of the deal.

Linda Nazareth:

Have you talked to some of the workers who actually need to use this service? I know you speak to the companies, but what’s the feedback in terms of their financial stress and what they need? You mentioned childcare and the like, but accessing the money, what’s the difference in their lives?

Sabina Bhatia:

Absolutely. We run tons of surveys, we speak to users every day, thousands of users every day, and most recently, actually, just a couple of weeks back towards the end of January, we ran a survey across 2 million users, and I have the results for you. You’re an economist Linda, so you’ll appreciate the data. And the results were 95% of the hourly workers are interested in working for an employer who provides earned range access. 89% would be willing to work longer if they had access to EWA, and 79% said that they would be willing to move employers to get access to earned wage access. So you cannot ignore that, instant gratification, but most importantly, just access to whatever you work for, that is what they want.

Linda Nazareth:

That’s great, I mean, you may think this is a naive question, but what about getting people to the point where they’re not that desperate? Are we even having that conversation? Because presumably, yes, you want the money you’ve made this two weeks, you don’t want the lag, but surely people should have money from the last two weeks or the last months. Are we making any progress on saving? Is this even a goal?

Sabina Bhatia:

100%, 100%, and I’ll tell you why I say this. So we’ve created what we call the livelihood index. Let me define how we look at livelihood. Livelihood is basically a means of securing the necessities of life. Necessities means food, fuel, auto, shelter, phone, internet, some kind of clothing, sleep, things like that. What our goal is that an hourly worker, with access to their earned but unpaid wages, gets through that basic need livelihood. I have access to my earned but unpaid wages, all my expenses that fall between pay periods. I can take care of that, versus spending $35, $40 on overdraft fees, that 200 billion in fees that is paid on an annual basis by hourly workers. Now that is distracting, that doesn’t help in savings. So when you don’t have that liquidity, there will be a bank there, or there will be a financial institution there that will find a way to monetize on your weakness.

So what we are saying is that give them access to their liquidity, let them take care of their business. And now we look at Maslow’s hierarchy. So you go up the ladder, you meet your basic needs, then you go up to your safety and security, love and belonging, self-esteem, self-actualization, then you get into the savings. I feel confident I can take care of my day to day. 

Now I can show up at work on time, now I’ll go grab that shift, now I want to be part of the culture of the organization. Now I also have employers that are so engaged in my life they want to make it better. That is a dialogue we’re hearing from employers. Then is your long term goal of financial wellness. So we are seeing it, it takes time, but we are seeing it, and we’re taking the right steps to get there.

Linda Nazareth:

You mentioned conscious capitalism earlier. Sabina, what’s your definition of that?

Sabina Bhatia:

For us, purpose and profit are equally important. If you look at our organization, our model, our pricing model, our platform, everything is aligned to help the user. I’ll give you one example, during the pandemic we excused all fees for the users, all fees, whether it was accessed through an instant deposit, whether it was through an ACH transfer, whether it was through a cash pickup, whatever it might be, we just excused all fees. What we could have done is we know the hourly worker needs funds instantly, what we could have done is we could have excused everything else but still charged them for the instant fees. That’s not the right way to take care of users. Instead what we did was excuse all fees.

Another thing about us is that we don’t want a transaction based model. We have allowed the user the flexibility that, hey, I pulled out $40 to take care of a bill, maybe my calculation was wrong and an emergency happened and I need to take out more funds. So we have more of a membership model instead of a transaction based model. So our model, our message to the users, our priority, is all towards the user. We believe that we have to do the right thing for the user, and then we can see the impact on the business and to the community. We don’t pick and choose how we serve employers. We are serving users. So my smallest business that I serve is two employees, and the largest business I serve has more than a million employees. So it’s the mindset of doing it the right way, and it starts from the culture of the organization. We are all very user-centric, very user based. So purpose and profit is very, very important to us, they are equally aligned for us.

Linda Nazareth:

Very ambitious goals, and ambitious projects, hopefully we see some progress on this as we come out of the pandemic and into the next phase of whatever work life is. Sabina, thank you so much for talking to me today.

Sabina Bhatia:

Thank you so much Linda, appreciate it.

Linda Nazareth:

Sabina Bhatia is Chief Customer Officer of Payactiv.

Well, that’s it for today. If you want to know more about Sabina and her work, please take a look at the show notes, you’ll find some links there. If you’d like to connect with me I’m on Twitter at @relentlesseco. Now if you did like this conversation about work and the stresses of work and the future of work, please take a moment and leave a rating or a review wherever you get your podcasts. That will really help people to find us and help us to keep these discussions going. Thank you so much for listening, and thanks as always to Stokely Audio for audio production.

To learn more about work and the future, and to see show notes, click here. You can also contact them at [email protected]. 

The Work and the Future Podcast with Linda Nazareth is a Relentless Economics Production.