Nelson Chai witnessed the rise of the gig economy firsthand while serving as Uber’s CFO.
Chai, now CEO of on-demand payroll company Daily Pay, also sees how gig workers struggle with the benefits system, which he says is “very much at the white-collar management level.”
“In most companies, salaries are paid biweekly,” Chai told CNBC’s Morgan Brennan at the CNBC CEO Council Forum in November. “But what’s happening now is that about two-thirds of households in this country are actually living paycheck to paycheck.”
This has had a major impact on gig workers in the United States, which Chai said is on pace to soon reach 86 million people. During his time at Uber, the company allowed drivers to “earn what they earn, get paid” before regular paychecks, and this was the premise behind the creation of Daily Pay, he said.
DailyPay’s technology platform allows businesses to integrate with nearly all major payroll and time management systems, giving workers instant access to the wages they earn instead of waiting until the traditional pay cycle. More than 1,000 companies offer Daily Pay to their workers, including Duracell, Jack in the Box, Bridgestone and AstraZeneca, according to Daily Pay.
Chai said it’s clear why employees would use it: “It’s a great service when you think about the alternatives, whether it’s overdraft fees or some type of loan that has very high interest rates.” DailyPay charges a fee for instant bank transfers, but employers can choose to make regular bank transfers free.
He said there are more than 6 million employees in the U.S. who are eligible for Daily Pay, and about 34% of them have opted in.
But employers are seeing the benefits as well. “We’ve seen about a 30% reduction in turnover in the companies we work with,” Chai said, adding that employees on the DailyPay platform are also over-indexing when taking additional shifts “as they watch their balances grow.”
“Many companies will see as much as 40% fewer front-line employees,” Chai said. “Think of the savings for businesses if you lower that to about 25%.”
