Traditional employee benefit packages often fail to meet the needs of low-wage workers, who frequently live paycheck to paycheck and have little opportunity to save.
The Shortcomings of Traditional Benefit Packages
Traditional employee benefit packages are typically designed with higher-income earners in mind. These packages often include retirement plans like 401(k)s, health insurance, and other perks that assume employees have discretionary income to allocate towards savings and investments. However, for low-wage workers, these benefits are often impractical and unattainable.
- 401(k) Plans Are Ineffective for Low-Income Workers: 401(k) plans require employees to defer a portion of their salary into a retirement account, with potential employer matching. For low-income workers, even a small reduction in their take-home pay can be unfeasible. With many living paycheck to paycheck, they simply cannot afford to set aside money for future savings. According to industry statistics, less than 20% of workers earning under $50,000 participate in a 401(k), and this rate drops to just 6% for those making under $25,000.
- Lack of Financial Flexibility: Low-wage workers often face immediate financial needs that make long-term savings plans impractical. Their financial lives revolve around their paychecks, leaving no room for traditional savings or investment accounts. This lack of flexibility and choice exacerbates their financial instability.
- Overdraft Fees and Minimum Balance Requirements: Many traditional banking services impose fees and minimum balance requirements that low-wage workers struggle to meet. This leads to frequent overdraft fees and penalties, further straining their limited financial resources.
Recognizing These Challenges for Everyday Americans
Recognizing these challenges, Jason Lee first founded DailyPay in 2015 to introduce earned wage access. DailyPay allows employees to access their earned wages before the traditional payday, providing immediate liquidity and reducing reliance on high-cost payday loans or overdraft protection. This innovation addressed a critical need for many low-wage workers, offering them more control over their finances.
Building on the success of DailyPay and his deep understanding of the financial struggles faced by low-income workers, Lee founded Salt Labs to offer an even more comprehensive solution. Salt Labs operates out of New York and has raised $18 million in seed funding within its first year. The company’s innovative approach centers on a new form of employee benefit that accumulates savings without reducing take-home pay.
Salt Labs’ system allows employees to earn a virtual reward, or Salt, for every hour they work. This reward accumulates automatically in an app on their phone and is separate from their regular paycheck. Initially, employees cannot spend their Salt, but once they build up enough rewards, they can use it for significant purchases, trips, or investments, such as individual retirement accounts.
Lee explains, “We have built [a savings] program that you can’t spend. It’s this thing that lives in our app that’s called Salt. … It naturally accumulates because you can’t spend it.” This approach ensures that employees build savings without impacting their immediate financial needs.
As Lee noted in his keynote at the American Payroll Association’s annual Payroll Congress in Nashville in May 2024, he is motivated by the endless possibilities that this data platform can unlock for everyday Americans. “Traditional institutions offer legacy products for workplace banking programs, like employee loans and 401(k). We need to think outside the box—their most valuable asset is their time—so how do we structure the underlying data of that asset in a way that is valuable to capital markets so that they [workers] can monetize it?”
Lee’s vision is to empower everyday Americans to achieve genuine financial progress and to equip HR departments with a comprehensive benefits package that caters to every aspect of workers’ financial needs. “I envision a future where these products will be integrated within a bank, allowing you to view your checking and savings balance, along with your Pay, Salt, and other assets, all in one seamless user experience as you clock out from work.”
