Why Do We Only Get Paid Every Two Weeks? | EarnIn

February 28, 2020

Why Do We Only Get Paid Every Two Weeks?

Payday is, to most people, a good day. The one downside is that you typically have to wait two weeks (or a week, or if you’re really unlucky, a month) for it to come around. It’s a schedule that seems randomly thrust upon us. Why isn’t it more common to get paid three times a week or every day? Why do so many people get paid on a two-week cycle?

It turns out the pay cycle is largely based on historic precedent. According to Nelson Lichtenstein, professor of history at the University of California, Santa Barbara, the modern payroll system really began in the 1940s.1 In 1942 the United States implemented a mass payroll tax for employers, and at a time without widespread electronic transfers or advanced computers, companies took a lot longer to deduct those taxes from their employees’ pay and send that money to the government. To balance paying their workers regularly with efficiently handling their payroll taxes, those companies adopted a two-week or monthly pay cycle.

However, the world has come a long way since the 1940s, especially with regard to how money moves. Automated Clearing House, or ACH, transfers enable banks to electronically transfer money between accounts. Small businesses have mobile point of sale systems that can process credit card payments wirelessly. Social payment apps let you quickly send money to your friends with a smartphone. So why do we still have to wait to get paid from work?

With current financial technology, many of the companies we work for should have the ability to pay us more frequently. Don Weinstein, vice president of product and technology at payroll company ADP which serves one in six working Americans, says employers could pay employees daily if they wanted.2 However, they choose not to because it would be more expensive and time consuming, and some businesses don’t have the cash flow to pay staff that often. Instead, roughly half of the companies working with ADP pay their staff every two weeks, a quarter pay every week, and a quarter pay once a month.

Now, some businesses actually do pay workers more often. In 2015, rideshare company Lyft partnered with payment company Stripe to create a feature for Lyft drivers called Express Pay, which allows drivers to quickly access the money they’ve earned.3 Employers that can’t or don’t want to build their own platforms for paying employees are partnering with earned wage access companies such as Earnin, which just launched its business-to-business program, to provide similar utility to their staff. Progress is happening and now some workers have more control over their pay.

Even still, it’s not perfect. Earned wage access is a helpful benefit for employees, but ideally getting paid for hours you’ve already worked wouldn’t be considered a benefit at all. Instead, It should be the default way that people get paid. Maybe earned wage access will grow in popularity to the point that getting paid as you work becomes as common as lunch breaks and overtime. Until then, you’ll have to make due with relying on your employer to offer it as a perk or signing up for an earned wage benefit service yourself.

EarnIn is a financial technology company, not a bank. Bank products are issued by Evolve Bank & Trust, Member FDIC. The EarnIn Card is issued pursuant to a license from Visa USA Inc.

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