Waiting for paychecks can be tricky. But even more challenging are the worries of being in a cash-strapped economy.
Fortunately, employees can now avoid these stresses by using earned wage access. Employees can access a portion of their wages before payday with on-demand pay, an employee benefit.
In addition to boosting morale, employees who use earned wage access are more focused at work. Financial worries and stress can be significant distractions and a drain on productivity. Having the peace of mind to know they can pay their bills and cover unexpected expenses with their earnings before payday allows them to focus on their job.
What is earned wage access compared to traditional payroll? Unlike traditional payroll, EWA programs allow employees to accrue their wages throughout the pay period and withdraw money any time they like up to the day before payday. There’s no impact on your business process; employees only have access to funds they’ve earned, reducing their reliance on high-interest loans or payday advances.
Many workers are now prioritizing building an emergency savings cushion and looking to employers to help them. This is why earned wage access is growing in popularity and is quickly becoming a key component of many companies’ benefits packages.
The good news is that most employers offer this benefit at little or no cost to their employees, with some charging a small membership fee or transaction fee. Using an app or website, employees can check their balance, see how much they’ve withdrawn and when, and transfer money to their bank account as soon as possible.
Employees can be significantly distracted by financial stress. When they are worried about paying their bills, they may be unable to focus on work or make decisions that will benefit them in the long run. Having access to their wages before payday can help them reduce that stress. This will result in lower absenteeism and a more productive workforce.
When money is tight, some employees will turn to payday lenders for cash advances that come with high interest rates. Employees who take out predatory loans may become locked in a debt cycle. When companies provide earned wage access, employees have access to their funds without paying excessive fees. As a result, individuals are less likely to utilize credit cards or other techniques that can result in costly overdraft fees or interest rates.
Employees who have access to their wages before payday are also more likely to save for unexpected expenses and longer-term goals, which can improve their overall financial health. This can also boost morale and increase job satisfaction, as employees are more confident they have the resources to cover emergencies. Many employers who offer on-demand access to earned wages witness an increase in applications from workers looking for a company that offers the same benefits.
With more employees than ever living paycheck to paycheck, the idea of having access to their salary early has become an expectation. Providing them with an on-demand pay option can help employers meet those expectations and increase employee satisfaction. A happier, less stressed team performs better and saves the company money by reducing staff churn and the need to train new hires.
By offering EWA, your business can help them achieve that goal without requiring them to ask a manager for an advance or risk accumulating debt from payday loans with high interest rates. With 48% of the workforce claiming that their financial stressors distract them from work, a user-friendly and affordable EWA platform can keep them focused on the job.
When choosing an EWA provider, ensuring that the fees associated with the service are as transparent as possible is essential. Some providers charge membership and transfer fees that can quickly add up for employees who regularly use this benefit. Ensure you consider these fees when calculating the benefits of your EWA solution.
Adding earned wage access to your benefits package can make your business more attractive in a competitive recruitment landscape, and it can also be used as a selling point during interviews to attract new candidates.
Boosted Mental Health
Employees’ mental health can suffer as a result of financial stress. This can divert their focus from work and lead to absenteeism, low productivity, or safety concerns. Using a tool like earned wage access can help employees regain control of their finances, improving their emotional and physical well-being.
With only one monthly paycheck, saving money and creating an emergency fund can be difficult. But with on-demand pay, employees can withdraw funds on their terms and set up automated savings. They can then grow their savings over time and manage their money on their own — without the need to borrow or turn to payday loans with high interest rates.
In addition, having a safety net can give employees peace of mind when something unexpected happens, such as a medical emergency or car repair. With EWA, employees can close the gap between paychecks and get the cash they need to navigate a financial crisis.
Investing in your workforce’s financial wellness will help them feel supported, which can decrease stress and increase engagement and productivity. Offering a solution like earned wage access is a big differentiator in a competitive job market and can help you recruit the best talent for your business. Adding it to your list of benefits also gives you a strong retention advantage, with employees staying 27% longer at companies that offer the benefit.