Instant Pay Raises Ethical Dilemma: Yooz CFO's Trade-offs and Choices
John Gronen, CFO of Yooz, an accounts payable software company headquartered in Dallas, Texas, is facing an ethical dilemma: whether to offer earned wage access (EWA) services as requested by employees. While he acknowledges that EWA can help employees avoid credit card debt, he fears that instant spending could leave them unable to pay rent at the end of the month. A recent company survey of about 1,000 employees found that only 32% prefer instant payment, while 58% still favor a fixed payday. Gronen currently leans against launching the service but is working with HR to assess implementation costs and employees' real needs. In a previous role, he opposed offering BNPL services to sports betting companies, arguing that gambling should be paid in cash. If ultimately implemented, he advocates that the company bear the cost rather than charging employees, to boost satisfaction and reduce turnover.
Yooz CFO John Gronen tends to keep an open mind when responding to employee requests for new services or benefits. However, when some employees at the Dallas, Texas-based accounts payable software company expressed interest in earned wage access (EWA), he researched the pros and cons while also harboring concerns about the potential risk of overspending it could trigger.
"Getting paid every day has its benefits, but there are also costs," Gronen said in an interview. He currently leans toward maintaining the "old-school" approach, where employees are paid once or twice a month.
Since 2023, several U.S. states have begun passing laws favorable to EWA service providers, although the industry has also sparked controversy due to fees attached to some services, as reported by Payments Dive, a sister publication of CFO Dive.
To gain deeper insight into employee views on this benefit, Gronen decided to add questions about EWA services to a recent company survey. Yooz told CFO Dive that among approximately 1,000 surveyed employees across industries, fewer than one-third (32%) expressed a preference for instant pay, while the majority (58%) favored fixed paydays.
Gronen himself is not convinced it is a good idea, although he acknowledges that EWA services do have some notable benefits, as users can tap into daily cash flow rather than relying on credit cards.
"As a CFO, you want to make sure you're doing the right thing for employees, helping them avoid getting into trouble," Gronen said of EWA. "There are many benefits, but the downsides scare me—some people get $1,000 or $100 today and spend it immediately, and then when the beginning of the month comes, they don't have money to pay rent."
A gambling-like dilemma
Gronen joined Yooz last year, and in his previous role as finance chief at Sightline Payments, he faced a similar ethical dilemma. In 2021, the payments company considered offering BNPL (buy now, pay later) services to a sports betting company but ultimately decided against it. "I was strongly opposed. If you're going to bet on sports, you should have cash on hand," Gronen said. "Casinos operate because, generally speaking, bettors lose. For me, that outweighed the benefits of providing the service to the company."
Currently, he leans toward not offering EWA, while still working with HR to evaluate what would be required to implement the service in the U.S. Yooz currently has more than 500 employees, and all U.S. employees are paid biweekly on a monthly basis. He anticipates that if an instant pay option were launched, it might be offered only to U.S. employees, as payroll processes in Europe are more heavily regulated.
Next, he will conduct an employee poll with HR to understand how many employees and which types of employees truly need instant pay. He will also need to research the cost of banking services and the time cost for the team to provide the service.
Costs become significant
Although he declined to disclose the specific fee for processing each electronic payroll via the ACH network, he said the cost to process a single employee's payroll is approximately $1.50 to $2.50. In addition to transaction costs, there may also be internal administrative costs, such as those related to commissions. For example, if employees need to calculate commissions daily, that could incur corresponding labor costs.
"If you have a large number of employees, the costs become significant," Gronen said of instant pay. He added that Yooz has more than 500 employees.
Given these concerns, why is Gronen still considering EWA? Not to mention, if the service were implemented, he believes the company should bear the costs rather than charging employees additional transaction fees. He admits the answer is somewhat "selfish": spending and benefits that support employee satisfaction ultimately benefit the company's bottom line.
"Employee turnover is one of the factors that hinders company growth," Gronen said. "Every loss sets you back."