Traditional once-a-month commission checks outdated
By: Camille Barlow
“If you don’t pay people quickly enough, and they find they’re being paid quicker by another company, they’re going to leave.”
—Natalia Yenatska, Chief Operations Officer, i-Payout
Since its inception, the direct selling channel has prided itself on bucking convention. From introducing the gamechanger of residual income to openly eschewing the traditional 9-to-5 workday, direct selling companies have aimed to divert from the norm.
Yet, the channel persisted in hanging on to one of corporate America’s most time-honored practices—the traditional monthly payroll system. For years, direct sellers have mimicked this process for its commission payouts, resulting in those highly anticipated, once-a-month checks.
Even in adopting direct deposit—which was revolutionary in its day for electronically dropping a person’s pay into a specific bank account—the timing was based on the typical corporate calendar. In fact, a number of direct selling companies continue to operate in this manner.
At the same time, it’s 2020, and technology is now transforming virtually every facet of modern life—including how we pay and get paid for work. It has also sparked the explosion of the gig economy, prompting workers across countless industries to push for more frequent payouts and more autonomy over their own schedules.
“Those are now the expectations of all workers, whether they’re gig workers or not,” says Mark Brodbeck, chief marketing officer at KyckGlobal, a cloud-based payment platform headquartered in Atlanta. “We all want more flexibility, and to get paid how we want. A lot of younger folks have never had a bank account. They’ve always used p-to-p payments.”
Even some large, mainstream retailers such as Walmart as well as smaller fast-food franchises have begun using apps that allow employees access to wages—for minimal fees—as soon as they have earned them. Add in the widespread popularity of Uber, Lyft, Task Rabbit and others that pay workers far faster than typical employers, and direct selling companies are feeling the pressure to compete in this arena.
Many direct sellers have begun to realize that getting creative with payments will ultimately translate to staying power, says Natalia Yenatska, chief operations officer at i-Payout, a payment management software firm with offices in the U.S. and U.K.
“We do see that people want to be paid faster, and everybody strives for that convenience. And it’s not only on the distributor side, it’s on the company side too,” she says. “They know that giving their people an optimal solution to be paid is very important and is going to separate them from the rest.”
There Is Value in Variety
Some observers argue that it’s well past time for the channel to embrace a new way of thinking about payments. “Direct selling tends to be more traditional and slower to adopt new things,” says Andi Sherwood, director of strategy and plan design at Dan Jensen Consulting. “There are a variety of companies trying to change that. If we don’t, that’s bad news for us. We have to change.”
One company that rose to the challenge was cosmetics powerhouse Younique, which, in 2015, introduced an instant commissions initiative that allowed its distributors to be paid within three hours of making a sale on their personal websites.
While the majority of direct sellers have not yet embraced instant payments, many companies are showing a willingness to be more flexible in the options they offer to distributors.
At Nu Skin, distributors have the ability to earn and be paid daily, weekly and monthly.
“We’ve certainly heard tremendously positive feedback from our sales force relating to more frequent and timely payments, including the flexibility to earn and request payment as often as daily,” says Chris Stubbs, senior vice president of global sales and operations. “We’ve also heard from our sales force that they would like the flexibility to choose their payment timing to meet their personal situation.”
At Utah-based New U Life, distributors are paid commissions every week. “The battle is retention,” says Jeremy Wardle, vice president of marketing. “The sooner you can get money into individuals’ hands, that’s great for retention. Even if it’s $50, it’s better to give them something soon.”
But in a channel already fighting to keep distributors engaged, loyalty and rewards programs are just as important as commissions, he adds.
“If a distributor knew that if they enrolled 20 people only two to four of them would stay a year, that’s very deflating, but that’s the industry,” Wardle says. “So that’s why we need to have a little bit of gamification and some rewards. The key is figuring out the secret sauce of how we reward specific behaviors that keep people in long-term.”
In addition to paying weekly, New U Life uses a wide range of payment methods including standard direct deposit, various ACH payments and prepaid debit cards as well as apps such as WeChat and Alipay.
Sherwood, who advises numerous direct sellers, says some methods, in particular prepaid debit cards, can be intrinsically valuable to the channel.
“In an industry that is predominantly made up of women in the field, some like having that money separately,” she said. “You know, ‘This is my card with my money from my business.’ ”
For many direct sellers, moving away from mailing out the traditional monthly check is a function of needing to cut costs—paper, printing, and people—and falling in line with how the world operates today.
“We also have the challenge of that instant gratification world we all live in,” Sherwood says. “People want money now, and especially the younger generations want money now. That’s where companies are trying to find a balance. I think we’ll continue seeing this as a big part of our industry.
Crystal Holtzendorff, director of global sales and sales operations at PayQuicker, agrees, saying this awareness of the field’s desires has made instant payments a leading 2020 trend.
She says, “New companies are implementing all-digital full-service banking programs from the start. Legacy businesses are also working hard to convert and modernize. Slow payouts leave distributors unmotivated.”
Innovation as Necessity
For many direct sellers, the evolution and innovation of payments has been fueled by necessity after expanding to a country or region that lacks widespread access to traditional banking options.
“Where many regions are well banked—the U.S., Canada, Europe, Australia—outside of that, people need a different way to get paid,” says Yenatska of i-Payout, which currently supports companies doing business in roughly 90 different countries across North and South America, Europe, Africa, and Southeast Asia. “We truly go out of our way to seek out nontraditional ways of how to pay people.”
One of those methods is known as cash pickup, and through partnerships with Western Union and other money transfer services, a company can make it possible for distributors who don’t have bank accounts to arrive at a location and pick up their commissions in cash.
“Ultimately, the goal for everybody is the same,” Yenatska says. “They want to make sure they are able to deliver the payment to their producers as quickly and efficiently as possible. If you don’t pay people quickly enough, and they find they’re being paid quicker by another company, they’re going to leave.”
Wardle says New U Life sees the evolution of new payment methods as an important tool in the larger effort to help people earn a sustainable living in developing countries.
“If you look at India, if you look at the favelas of Brazil—80 percent of our base is women,” he says. “How can I empower a woman to build a life outside of the slums? How do we help lift them out of poverty?”
As fast as technology is advancing and changing global commerce, many direct sellers are finding that creative payment methods are now a permanent competitive fixture.
“It’s forcing companies to rethink their compensation and what kind of choices they are giving their workers,” Brodbeck says.
“If on a commission, I have to wait two weeks at company A, and company B pays me in six hours, that’s a no-brainer for me. The rubber hits the road about timing and my freedom of my assets that I earned.”
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