Pay flexibility is emerging as a new "retention lever" that's sitting right under employers' noses, according to a new report, which found that organisations are behind in modernising their payroll systems.

Findings from Rain's latest survey revealed that 56.6% of employees consider faster access to earned wages as a benefit that would make them stay longer with an employer.

Employers agree at least in principle, with 71.6% of them believing pay flexibility could reduce turnover.

The problem, however, is urgency.

"Employees describe a behaviour change (staying longer) that results from pay flexibility, while employers frame pay flexibility as a future lever rather than a present one," the report read.

In fact, the report found that just 56.4% of employers say leadership views pay flexibility as a strategic priority.

"Pay flexibility is a retention level that doesn't require raising wages - yet it remains underutilised because employers don't see the urgency," the report read.

Modernising payroll systems  

The urgency problem when it comes to payroll is highlighted by the low share of employers planning to modernise their systems.

Just 52.7% of employers said they plan to modernise payroll in 2026, according to the report.

This is despite 92.2% of employers agreeing that faster pay improves employee engagement, and 89.5% of employers agreeing that financial stress negatively impacts employees' productivity.

"Organisations overwhelmingly understand and agree on the conceptual case for pay flexibility, they just don't see it as a need right now," the report read.

Financial challenges for employees  

This lack of urgency in modernising payroll systems is leaving employees in more difficult positions, according to the findings.

More than a third of employees (39.2%) reported paying overdraft, payday loan, or late fees, while another 29.3% said they spend $50 or more per month just to bridge payroll gaps.

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