We live in a world of instant access to entertainment, food, and virtually everything else, so why shouldn't addressing specific challenges in the payroll process that potentially delay employee pay be solved by instant capabilities? That’s a question JPMorgan Chase and ADP are addressing by embracing real-time payments in payroll.

ADP has had instant payments in the market for nearly 20 years with their prepaid payroll card, according to Matthew Hardy, Strategy Executive, Global Payments & Compliance at ADP. But its use of instant payments over the RTP® network is relatively new.

“What's different with RTP is that it utilizes routing numbers and account numbers in an instant manner, where payments can be made within seconds versus hours, creating far less friction for the client and the employee receiving funds,” Hardy said.

The two companies have a long-standing global collaboration, according to Rupa Krishnan, Global Head of Real-time Payments at JPMorgan Chase. The firm is helping the human capital management solutions provider to capitalize on industry payment innovations and advancements to see how it can best leverage these new opportunities to fit its business model and business needs.

Growing types of payments
ADP categorizes payroll in two different ways: standard and expedited. Standard is payroll as it is traditionally known – regularly occurring payment of wages during a scheduled cycle, whether it's weekly, bi-weekly, or bi-monthly.

Expedited payments, also known as off-cycle or emergency payments, are anything that falls outside of the standard cycle that requires faster processing and faster payment. This includes situations where the employee quits or is terminated, payroll corrections for short-pay or a processing error, and even situations such as natural disaster assistance.

The burgeoning instant payment industry
ADP is one of the many companies taking advantage of instant payments capabilities to better serve customers and their employees. In Q3 of 2024, there were a record 87 million RTP transactions valued at $69 billion. More than 250,000 unique business originators and five million consumers are sending and receiving instant payments each month on the network, almost double the growth year-over-year.

While checks or ACH are options in many cases for correction or emergency payroll, the employer may not have all of the relevant information on hand to execute necessary security features to mitigate fraud. Checks need to be in the possession of the employee to be cashed during business hours, which is problematic with remote workers or on weekends or holidays when banks and credit unions are closed.

“There are many factors that come into play during an expedited pay situation. The legal requirements vary by state, and the client will need to decide how they are going to pay wages in a compliant manner. In some states, if a check is issued, the employer may need to pay additional wages to the employee until the check arrives,” Hardy said.

A successful pilot
ADP conducted a proof-of-concept last year for instant payments on the RTP network and achieved a 60% success rate as it related to account availability, Hardy said. That gave ADP the confidence to “jump into this space as quickly as we possibly could.”

ADP has decided to continue its pilot with instant payments, and the company is still in the learning phase where it is making the necessary tweaks to the plan. Eventually, ADP plans a phased rollout across business units.

Reducing friction and improving compliance
“Same-day ACH is great, but there are still hours of delay between when the payment is initiated and when the payment is received,” Hardy said. “If you remove that lag, the employee stops calling and the manager isn't being inundated with phone calls. Additionally, payroll isn't answering follow-ups to the same ticket.” The result is a more efficient process that increases employee satisfaction.

The vast majority of ADP’s clients don't have payroll teams that work beyond 8 a.m. to 5 p.m. EST, Monday through Friday, explains Hardy. Therefore, any request that happens outside of that time window historically gets pushed to the following business day. However, that is an issue for companies in immediate pay states, companies with 24-hour operations, or West Coast clients that extend beyond the current same-day ACH windows.

“In certain situations, we've actually seen clients pay extra wages to solve the need in a compliant manner because they don't have the means to pay someone after hours on weekends or holidays,” Hardy said.

Financial institutions, their business customers, and technology providers are all starting to see how instant payments are changing the way money is moved.

“Instant payments are, no surprise, instant, and … the client and the employee both get instant confirmation the money went where it was supposed to,” Hardy said.

Better together
JPMorgan Payments has invested in its people, processes, and technology to enable connectivity to the RTP network, collaborating with ADP specifically to determine the right use cases.

“Our APIs and our integration models are fairly mature,” Krishnan said. “Given the size and scale at which ADP operates, we had to ensure that we started with a deep understanding of ADP's needs, its processes and systems, and most importantly ensure that we did sufficient testing to ensure smooth execution.”

The goal is for their clients to consume these transactions without any disruption, which enables their business operations to run in a very smooth manner, Krishnan said.

Krishnan added that since ADP has the employee’s bank account and routing numbers, which not every business has, it is an ideal partner for sending instant payments, since the RTP network also relies on bank account information to send payments.

A bright outlook
“Instant payments are here to stay,” said Krishnan, adding that ADP adopting the RTP network is a pivotal moment for the industry.

“Exception pay, anything off cycle, is becoming table stakes, as opposed to something that's going to be game-changing,” Hardy added. “I think it's going to be considered the norm sooner versus later.”

In addition to payouts, ADP envisions the RTP network being used for requests for payment to fund payroll accounts.

Hardy added that while sending instant payments over the RTP network may have started for emergency payroll-type situations, ADP is exploring additional use cases and certain verticals where instant payroll is a value proposition. The goal is to provide solutions at various speeds to meet the needs of our clients and their employees.