While serving as CFO of Uber, Nelson Chai got a firsthand look at the rise of the gig economy.
Chai, now the CEO of on-demand pay company DailyPay, also saw how gig workers struggled in a pay benefit structure that he says, “has really been about the white-collar management level.”
“For most companies, you get paid bi-weekly,” Chai told CNBC’s Morgan Brennan at the CNBC CEO Council Forum in November. “But what’s going on right now is about two-thirds of the households in this country are actually living paycheck to paycheck.”
That is heavily impacting American gig workers, which Chai said is labor pool on pace to soon reach 86 million workers. While at Uber, the company allowed drivers to “get their pay after they earned it” in advance of a regular paycheck, a premise that DailyPay was founded on, he said.
DailyPay’s technology platform can be integrated into nearly all major payroll and time systems by companies, allowing workers to instantly access their earned wages as opposed to waiting until traditional pay cycles. DailyPay says that more than 1,000 companies offer it to workers, including Duracell, Jack in the Box, Bridgestone and AstraZeneca.
Chai said it’s obvious why employees are opting in: “If you think about the alternatives, whether it’s an overdraft charge or some kind of loan that would be very high interest rates, it’s a great service.” While DailyPay charges for instant bank transfers, employers can choose to make regular bank transfers free.
He said there are more than six million employees across the U.S. who are eligible to use DailyPay, and about 34% of them have opted in.
But employers are also seeing benefits as well. “What we have found is that companies we partner with have seen attrition drop by about 30%,” Chai said, adding that employees on the DailyPay platform over-index when it comes to picking up extra shifts as well “because they’re watching their balance grow.”
“For many companies, they’ll have 40% attrition for frontline workers,” Chai said. “If you drop that down to around 25%, think about the savings for companies.”
