For the Gig Worker, "Paycheck to Paycheck" Doesn't Cut It

Posted by
Jayant Ramchandani
March 17, 2022

The expression “living paycheck to paycheck” describes the abject financial condition of workers who exhaust available liquid assets by the end of every pay cycle. These workers become not only increasingly desperate toward the end of a pay cycle but are also dependent on their employment and thus the goodwill of their superiors. The phrase characterizes the state of billions of people across the world.

Specifically in the US, a 2015 Atlantic Magazine poll revealed that over two-thirds of Americans who earn less than $40K/year would be forced to take drastic action, including selling household items, if they were hit with a $400 emergency. This indicates “paycheck to paycheck” is a tragic reality for tens of millions of people across the country.

Two-thirds of people earning less than $40K/year cannot readily access $400. Let that sink in.

Well, the average Gig Worker in the US earns $29K/year. In 2022, Gig Workers are nota fringe case: Up to 30% of Americans are involved in the Gig Economy with about 40% of those indicating that Gig Work is their primary source of income. Gig workers overall represent a $1.2T economy, or about 6% of US GDP.

For Gig Workers, it goes beyond “paycheck to paycheck”: They live “task to task” or “job to job.” For Americans earning $29K, caught in the vice of rising house prices, inflationary pressures, and the Covid hang-over, waiting two-weeks to get paid can precipitate days of pain and possibly even hunger.

We need a payments solution that seamlessly and frictionlessly allows Gig workers to be paid upon completion of a task – multiple times a day if appropriate.

The technocratic among us might say, “well let’s create a technology solution” for this. Indeed, that is a smart first step, but the issue is not strictly technological but process-based too. Accounting reconciliation is the main culprit here, creating a large wake: Say 15 payments a week to a Gig Worker, or5 a day, would create that many accounting entries and reconciliations. This can be a manual, error-prone, and time consuming process. That problem must be solved.

Earned Wage Access (EWA) is the umbrella term for attempts to address this problem.  At Zact, we have created a platform that makes payments a matter of doing, not a matter of labyrinthine processes and reconciliations.  The current EWA implementations have many limitations, not the least of which is the high cost associated with accessing earnings before the traditional pay cycle.  Zact turns the model on its head by paying “task by task” versus “paycheck to paycheck,” paying the worker upon task completion, supporting multiple payment methods by which funds are made immediately available, and providing all the necessary reporting for Accounting systems and 1099s.