One of the main causes of people leaving their employment is the financial strain brought on by unforeseen costs. Earned Wage Access (EWA) can lessen this stress and lower staff churn.
EWA platforms allow workers to request advance payments on their wages before payday. This gives employees the flexibility to spend their money on their terms.
Boost Employee Morale
Amid rising inflation, the financial stress of living paycheck-to-paycheck can be a significant source of frustration for employees. Employees who can’t afford to buy groceries or pay their utility bills may turn to payday loans or other forms of debt to survive. Fortunately, there is a solution. So what is earned wage access? EWA is also known as earned wage access, earned income, early wage access, accruing wage access, or on-demand pay. Offering earned wage access can help employees take control of their finances, improve their financial wellness, and reduce the paycheck-to-paycheck cycle.
Earned wage access (EWA), solutions allow workers to receive portions of their wages before the employer’s traditional payroll date. Unlike payday loans and salary advances, EWA solutions are designed to reduce financial stress for workers and allow them to budget their money.
As a result, EWA programs can boost employee morale and reduce turnover. Companies that offer EWA see 19% higher employee retention rates. With the high cost of replacing an employee—around a fifth of their yearly salary—this is a critical component for any business.
To roll out an effective EWA program, start by gaining buy-in from your payroll team. This group is essential because they will be the ones to communicate with employees about the new system and answer any questions. It is also a good idea to get feedback from employees after 3- 6 months of implementing the program so you can determine the effectiveness of the EWA strategy and any changes needed going forward.
For many employees, the wait for their paycheck can be long and stressful. If they need to cover an unexpected expense, such as a car repair or medical bill, the financial stress can make it hard for them to work productively, causing decreased morale and increased absenteeism.
By offering earned wage access (EWA), a popular new payroll option, companies can help employees avoid the need for costly payday loans or credit cards. Through a simple app, workers can be paid advance portions of their wages before their regularly scheduled pay date. This can provide a much-needed lifeline for many struggling employees and reduce the days spent away from the job.
The EWA platform typically verifies the employee’s hours worked, then makes a portion of their earned wages available for transfer to a bank account or loadable debit card. Some platforms charge a nominal membership or transaction fee, while others require a minimum monetary balance to use the service.
Employers can increase job satisfaction and productivity by allowing employees to control their finances. Employees who feel less stressed about their finances can focus on their work and may show more positive behaviors in the workplace, including a reduction in absenteeism. By helping workers save money for their future, the employer can also boost morale and loyalty to the company.
Increased Employee Retention
Attracting and retaining hourly workers in the tight labor market can be challenging. Benefits like on-demand wage access can help employers compete in the job market and keep employees happier and more engaged.
A recent study found that nearly half of the employees would stay longer at a company that offered immediate access to earned wages after each day without incurring fees (56%). At Instant, we’ve seen firsthand that our clients see a 27% reduction in turnover when they implement on-demand wage access.
For many gig economy workers, especially those in the construction, transportation, and logistics industries, earning wage access is a key factor in their decision to join an employer. These individuals do not typically receive direct deposits and rely on earned wage access solutions to avoid costly payday loan fees.
By offering on-demand wage access, these workers can better manage their financial obligations and reduce the stress of living paycheck to paycheck. In addition, by having access to their earnings in real-time, they can avoid resorting to high-interest stop-gap options and maintain a strong savings balance. As the cost of living continues to rise, a benefit like earned wage access can be a valuable tool for employees seeking to ease the burden of the paycheck-to-paycheck cycle.
Improved Financial Stability
Employees with access to their earned wages can budget their money more effectively. Many platforms include budgeting tools allowing individuals to monitor spending and ensure they use their paychecks to meet their household expenses. This helps employees avoid frivolously using their advances or turning to payday loans or credit cards and reduces reliance on these high-interest stop-gap options.
In addition, some platforms offer mobile access to make it even easier for employees to manage their funds. This allows employees to access their paycheck advances on time and terms rather than waiting for a paycheck deposit.
This solution can benefit gig workers needing more consistent income and payment cycles. It can also help address the financial challenges of COVID-19 that have made it more difficult for employees to save money and build a safety net. By allowing employees to access their earnings before their next paycheck, employers can help them avoid the stress of financial instability and improve employee morale. Before rolling out Earned Wage Access, talk with your payroll team to get buy-in. Ensure they know the benefits and how they will impact your company. Additionally, research different options to identify the best solution for your business needs.