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Real-time processing (also called real-time computing) occurs when a computer or system processes data almost instantly. The quick response ensures that the processed information is immediately available to the user or intended application, providing information in real time.
Real-time payroll is a system that processes and calculates employees' wages and taxes as they are earned rather than waiting until the end of the pay period . Common pay periods for traditional payroll systems include weekly, bi-weekly, semi-monthly, or monthly.
In contrast, real-time payroll provides more immediate access to wages. Such systems can support on-demand, or earned wage access (EWA), payroll programs.
Real-time payments are electronic, instantaneous fund transfers between two bank accounts. They can be made all year round – even on holidays, weekends, and after business hours – giving consumers and business owners more flexibility.
Instant payments run through systems like the Real-Time Payment (RTP®) Network by the Clearing House or the FedNow Service by the Federal Reserve . These programs allow financial institutions to settle payments in real time, so people and businesses can send/receive money in seconds.
Beyond technological speed, real-time payments offer numerous benefits to consumers, employees, and business owners, such as:
Other payment methods, such as checks, take two or more business days to clear. These delays can cause uncertainty and stress for employees and small business owners who are struggling to make ends meet. Real-time payments enable more people to meet their most urgent needs and financial obligations.
Real-time payments reduce the amount of money delayed in the process. This transparency is mutually beneficial – it improves cash flow and liquidity management for employers, while giving employees a more up-to-date picture of their finances.
When people send payments in real time, financial data is transmitted simultaneously, helping administration run more smoothly. Employers can automatically match payments, resolve errors and reduce processing delays.
Once authorized, real-time payments are final. While beneficial for all employees, this can be especially helpful for independent contractors or gig workers , who might otherwise be taken advantage of by their clients. Unlike checks, real-time payments cannot be stopped, making it more difficult to violate contracts.
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