Global Human Capital Management Company Ceridian launched Dayforce Wallet, an on-demand pay solution. Ceridian Chairman & CEO David Ossip joins Yahoo Finance’s On The Move to discuss the company's latest payroll app.
- Well, as we know, the damage to the workforce in the US has been substantial during this coronavirus pandemic, but there are challenges, as well, even if you are employed. And maybe one of them is that you need to have access to cash a little more quick-- quickly than usual. Our next guest has developed a solution for that.
He is David Ossip. He is the Ceridian chairman and CEO. This is a HR management company that has a new product called Dayforce Wallet, which essentially allows you to get that real-time pay. David is joining us right now from Toronto.
Thank you for being with us. Traditionally, this kind of thing has been the province of payday lending companies. And now, you guys are getting into it. How do you avoid some of the pitfalls and abuses of that industry with this kind of a product?
DAVID OSSIP: Sure. Well, thanks, Julie, and glad to be here. So first, let me just describe the problem. When we actually look out into the industry, we find that employees are paid in arrears, which means that you work for either a week, possibly two weeks, a month, and then you get a paycheck a few days later.
And in today's environment, that's really not required because we know that all people oscillate between being cash-rich when they get their paycheck and cash-poor while they're waiting for the paycheck, and 80% of all individuals in America live paycheck to paycheck. And as you pointed out, there all more cash checking storefronts than there are McDonald's in the United States. This is obviously a very prevalent problem.
The way that other vendors have been trying to solve this is by having cards that have a monthly fee or charge to get loaded. So each time you add money to your card. We've solved it in a different way, in that, as you know, we do process payroll, and our Dayforce engine has something called a continuous calc engine, which means, at the end of every day, we know exactly how much you've made, a net of all your earnings. And we now allow you to add money to your Dayforce card.
And when you do that, we process all the payroll, we generate an earnings statement, and we do all the necessary remittances at the federal and state levels the very next day. So it's a true payroll. That allows us to solve it without any fees to the employee. So we don't have to charge a monthly fee, we don't not to charge now to load your card, and we don't have to charge the employer, either, or change the way that the employer funds their payroll.
- How do you make money, then? It's Adam, by the way. Welcome.
DAVID OSSIP: Hey, Adam. That's a great question. It's really an arbitrage play between the interchange fees that we get, and we act as a commercial lender to the organization. So if you do the math, the interchange is about 125 basis points, about 1.25%. And our cost of funds of lending to an organization is probably about 7 to 8 basis points. So you take the spread, and that really allows us to really fund the entire movement of money without fees to the employee or the employer.
- And David, Dayforce is your bigger suite of payment products that you offer to employers. There are fewer people being paid right now, as I mentioned at the top, because of layoffs that we have seen. What has that meant for your business?
DAVID OSSIP: From our perspective, we get paid for both active and inactive employees. So when employees are furloughed, we still get paid. So we're quite lucky that we haven't been as impacted as other organizations in the industry. As you can imagine, when someone is furloughed, there's a tremendous amount of value that Dayforce still provides to the company and to the person. There's quite a lot of complexity around the rules on the automation and such.
- Are you able to-- and I'm trying to understand it, I may get this wrong, but are you able, then, to stop a loan or a payment to a worker who might be on furlough who exceeds the potential for income based on the fact that they're on furlough, and that all might be coming to an end depending on which federal guideline they're, you know, adhering to?
DAVID OSSIP: So I'm not sure where the question is.
- Can you stop payment to somebody if you're not going to be able to get it from the company?
DAVID OSSIP: Ah, I see what you're saying. So we act as a commercial lender to the employer. And we only allow the employee to take out their earned wages. So it's not a loan at all to the employee. So if I work one day and I've made, say, $150 net of all taxes and deductions, I can see in the Dayforce Wallet the 150. And then I can add that to my Dayforce card and spend it immediately, whereas all the other services work like how you been-- you've actually said, they're doing an approximation of your earnings during the week.
- So but in the case of like the airlines, the airlines, we know September 30th, end of story, they're going to lay people off October 1st. So if one of them were your client, how would that work for you and this process?
DAVID OSSIP: So for each of the employees, they would see every day how much they've made up until that particular point in time. And they have the ability to add those earned wages to the card. When they stop working and they don't work additional hours, the number doesn't go up, but the funds are still available until the regular payroll runs. And at that point in time, the earned wages in the period go down to zero.
- Interesting. One of the many ways that people and companies like yours are adapting right now at this time. David Ossip, thank you for your time. He is the chairman and CEO of Ceridian. Appreciate it.
DAVID OSSIP: Thank you, Julie. Have a great day.
- Thank you. You, as well.