As COVID-19 continues to impact everyday life, employees feel pressured to make ends meet. They need financial security and a lot of it.
One way to provide this is by offering earned wage access, which is complimentary on-demand pay that allows workers to withdraw a portion of their wages before the end of the current payroll period. This benefits both the employee and the company.
Increased Productivity
Keeping employees happy and engaged has long been essential to any employer’s strategy. But, with a tight job market and high turnover rates, many companies need help to keep their best workers and attract new ones. Earned wages can be a solution to these problems.
Employees who use an on-demand pay benefit program report increased productivity. These programs allow employees to get the money they’ve earned before their scheduled payday, removing financial stress from their lives. This will enable them to pay their bills on time and avoid fees such as overdraft charges, late payments, and predatory payday loans. It also helps employees save and meet their budget goals.
For employers, a wage access solution provides an attractive alternative to other fast-pay options like payday advance apps and microloans. And it can be offered at no additional cost to the company. In addition, employees who use a wage access solution say it reduces their stress levels and improves their overall financial wellness.
This can lead to increased employee retention, as it can take a significant amount of time and resources for a company to replace an experienced and productive worker. It can take up to two years for a new hire to reach the productivity level of a skilled worker.
Reduced Stress
Stress can be a huge barrier to productivity. Stressed employees are less likely to work hard, focusing on completing lower-priority tasks or even taking time off. This can lead to a domino effect in your team, where other employees are underutilized and can’t spend their time on high-priority billable tasks.
Businesses need to support their employees in reducing workplace stress. Providing mental health and wellness programs is an excellent way to do so. Many of these programs also offer access to counseling, which can help with stress and anxiety in the workplace.
Another way to reduce stress is to offer earned wage access. Several studies have shown that employees who use salary advances are happier and more productive. This is because they’re not constantly worrying about financial stresses that can harm their work.
It’s estimated that lost productivity due to financial stress costs UK companies around PS15.2 billion annually (Ashleigh Webber, Personnel Today). Offering earned wage access is an easy way to combat this issue. This employee benefit helps to alleviate the stress of trying to survive between paychecks and allows workers to build savings habits that can help with future emergencies. Plus, it’s a great way to show your employees you care about their financial well-being.
Increased Satisfaction
A recent study1 found that employees with on-demand wage access feel more satisfied with their job than those who don’t have it. This is mainly because it allows them to manage their cash flow better and close the gap between paychecks, helping them avoid overdraft fees, late payments, and predatory payday loans.
Having wage access also makes it easier for employees to build savings habits and set aside money for emergencies. This is especially important during the pandemic when employees are under financial duress due to increased living costs. As a result, they may need help to save, with their average salary only coming in once a month. By giving workers complete control over their wages with EWA, they can withdraw more frequently and build a savings system that works with their monthly commitments.
In addition, employers can use their EWA provider’s dashboard to monitor usage and gather employee feedback about the program. This information can help companies identify areas of improvement and make necessary changes. The key to a successful Earned Wage Access program is to get your payroll team on board from the start. It could negatively impact your company’s adoption and effectiveness if they aren’t supportive. So it’s crucial to explain how the program will benefit your team and how much it can improve their day-to-day lives.
Increased Retention
Employee retention is becoming an essential consideration for many companies. High turnover rates can cost a business valuable time, money, and resources. Introducing an option like earned wage access can help reduce employee churn.
Workers who live paycheck to paycheck often find a disconnect between their daily expenses and traditional pay cycles. This can cause them stress and frustration, affecting their work performance, health, and well-being.
Traditionally, payroll is processed at pre-agreed intervals, such as the month’s or week’s end. Wage access platforms allow employers to allow employees to withdraw a portion of their earnings before payday, with the balance automatically reflected in their next paycheck. This will enable employees to manage their financial well-being and avoid the risks of predatory lenders, credit card debt, or overdraft fees, all while improving productivity.
For a service contractor to successfully implement an on-demand pay solution, it must be simple enough for employees to use without adding extra steps or work for the back office. This is where the earned wage access industry is growing in popularity, as it offers a way to promote employee financial wellness while allowing the employer to keep all regular payroll deductions and tax processing in place. A platform that integrates with a company’s existing payroll system will enable employees to see their accrued wages and request funds at any time, automatically adjusted in their next paycheck.
