Workforce

How the Construction Industry Can Keep Up With Rising On-Demand Culture

Earned wage access solutions eliminate the expenses associated with cutting paper checks, reduce potential fraud and help streamline and control construction costs.
By Brian Radin
January 17, 2023
Topics
Workforce

Most workers already know on-demand culture is now an integral part of all industries–think Netflix and Spotify streaming, Instacart and Shipt delivery and Uber or Lyft ride-hailing services. Consumers expect immediate access to just about everything in their lives.

The construction industry must keep pace, particularly since it has faced a 650,000-person workforce shortage in 2022. Construction management must consider other ways to attract and retain talent in light of such a dire need for workers.

In today’s world, the consumption of goods and services is mismatched with how construction employees are paid. A real-time, on-demand, connected commerce ecosystem has emerged across multiple industries, yet many employees and contractors are still compensated in old-fashioned, fixed-payroll cycles with paper checks.

For the construction population, this is leading to cash-flow challenges during a period in which the cost of living outstrips wages. The average annual wage of construction workers in the United States is $44,130, making it tough to make ends meet in a high inflationary period.

However, prepaid payroll cards and on-demand access to wages can help. Immediately following a shift, this benefit enables workers to access a portion of their pay. Other advantages for employees, contractors and employers come with these prepaid payroll cards and on-demand access to wages.

Slow to pay turns potential workers away

The "2021 Construction Payments Report "found slow payments cost the industry $136 billion last year. Not only did 67% of subcontractors surveyed state they did not bid on a project because of a general contractor’s or owner’s reputation for making slow payments, but the report also revealed 72% of subcontractors would offer their services at a discount in exchange for payment within 30 days.

Getting paid through a prepaid payroll card with on-demand pay, also known as earned wage access (EWA), construction workers can avoid costly bank fees for overdrafts and failing to maintain a minimum balance in their checking account.

It can also help employers eliminate the costly and time-consuming process of setting up, printing and distributing paper checks.

Improved payment methods help reduce fraud

Another advantage of prepaid cards for employers is that they help prevent fraud.

The Association of Certified Fraud Examiners found real estate and construction rank among the highest in the number of fraud cases reported and the highest amount of fraud-related loss. In fact, construction companies lose an average 10% of annual revenue to fraud.

Such fraudulent activities often take place during procurement. This can lead to falsifying payments, check tampering and forgery, expense account altering or stealing non-cash assets. Fraud often takes place when duties are segregated. Think, for example, how without adequate oversight one person is tasked with purchasing something for a project, while another buys an item and inflates the value or adds an item for personal use.

Prepaid cards provide increased internal control of spending to reduce fraud and misuse. For example, a manager or foreperson can fund construction payment cards up to a specific amount and track and report card spending in real-time. If a purchase is unwarranted, it is immediately apparent.

A step toward financial fitness

Another benefit of EWA and prepaid payroll cards is how they help employers support employee financial wellness. Obtaining their pay right after working a shift enables workers to pay bills quicker, and avoid relying on high-interest credit card fees or predatory payday loans.

Seventy-four percent of users say access to their earned wages has helped reduce their financial stress, while 70% claim tapping into their earned wages before payday has helped them avoid taking a payday loan. Additionally, 51% of users say access to their earned wages has helped improve their financial health, and 50% of users say receiving their pay before payday has helped them be more disciplined about spending.

Many EWA solutions, accessed through an easy-to-use app, double as a financial planning tool and enable workers to see where their money is spent. They can show a user exactly how much is available at any given time, helping to avoid overspending.

Pay the increasingly popular on-demand way

In 2023, the construction industry will need approximately 590,000 new workers in addition to typical hiring–just to meet current demand.

EWA and prepaid payroll cards can help. They enable workers to be paid right after a shift and help improve their financial wellness. For employers, these solutions eliminate the expenses associated with cutting paper checks, reduce potential fraud and help streamline and control construction costs.

by Brian Radin

Brian Radin is president of Comdata Prepaid. In his career, he has proven success with market leaders and start-ups across software, business services, human capital management and finance industries. He also has an impeccable record of maximizing the strategic business model, optimizing business processes, and creating innovative initiatives that facilitate sustainable growth, and generate traction in competitive markets. Radin has been recognized for identifying/securing key partners and sales channels, raising capital, building strategic C-level relationships with the investment community and developing highly engaged leadership teams that increased revenue, profitability and customer satisfaction.

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