In 2023, employers and HR are prioritising employee wellbeing and not just by offering discounted gym members. Employers are taking a more holistic approach in their wellbeing offering, by adopting mental, physical, and financial wellbeing tools. In fact, 95% of leaders are focused on offering financial tools to their workforce, and one of those tools is Earned Wage Access (EWA), otherwise known as On-Demand pay.
Earned wage access, a service offered by Paytime, empowers employers to provide financial flexibility and control to their workforce. Earned wage access is easily integrated with the existing payroll system and enables employees to access the income they’ve earned, without waiting for the traditional payday.
“Getting Paytime was a no brainer – helping our staff with financial flexibility at zero cost was an easy decision.” – Howard Herman, CFO at McGrath Real Estate
Let’s run through what Earned Wage Access is and how it improves employee productivity and retention:
What is earned wage access?
Also known as on-demand pay, earned wage access is a flexible financial service that enables employees to access their earned wages before a traditional, scheduled payday. Providing employees with the ability to access funds they’ve earned bridges the gap between timing of income and expenses, giving them a safe financial tool that doesn’t risk initiating a debt cycle (unlike loans or credit).
How does earned wage access benefit employees?
Implementing modern financial tools demonstrates to your employees that you value their wellbeing. Offering earned wage access does more than simply provide monetary compensation, it has a snowball effect.
Earned wage access reduces financial stress, bettering financial wellness and mental wellbeing, which results in appreciation towards their employer and less distractions at work, therefore leading to a better workplace experience and engagement.
Improved financial well-being and security
Consider this, how would a $500 unexpected expense impact one of your employees?
Would you be surprised to know that 50% of Australians live pay-check to pay-check, and 33% don’t have $500 spare for unexpected expenses?
Meaning, 33% of your workforce could not afford the $500 expense and would have to borrow money from a friend or bank in order to pay it.
With the record-breaking cost of living and increasing inflation, tools like earned wage access can alleviate employees’ stress, the stress knowing that one un-budgeted, unexpected expense could put them in debt. Constantly worrying about cash flow is mentally draining and a leading cause in employee disengagement.
Through earned wage access, employees can access income they’ve already earned and can even request pay advancements. This enhances their feelings towards their employer which in turn increases job satisfaction and motivates them to work harder to reciprocate the care they’ve been shown.
Less reliance on high-interest loans and credit
Without flexible access to their earned wages, many employees will turn to loans that increase their debt in order to manage an unexpected expense. The two most popular forms of debt used by those struggling to make ends meet are payday loans and credit cards.
Unfortunately, both these cash advancements come with high interest rates (particularly personal loans) and can leave borrowers with low credit scores. Low credit scores can cause difficulty in other areas of life, such as mortgages, which can further intensify financial stress and worsen one’s financial position.
With no penalties, strict eligibility requirements or high interest rates, earned wage access is the safe financial solution.
Higher employee satisfaction
Supporting an employee’s financial situation shows that you value them as a person and exercise your responsibility as an organisation to care for their holistic wellbeing.
In a team of 25 employees, 21 are likely carrying the burden of financial stress, which results in lower workplace satisfaction and engagement. Financial stress is directly linked to psychological distress, emotional exhaustion and heart disease. Battling the consequences of financial stress leaves minimal room for employees to focus on their work and engage with their colleagues.
Removing financial stress, or decreasing the magnitude of it, helps employees focus at work and better engage in their current projects. Increasing job satisfaction and productivity.
How does earned wage access benefit employers?
With a flexible payroll system, small businesses and large enterprises alike have the ability to build stronger, more efficient workforces.
Improved talent acquisition
Earned wage access gives your organisation a competitive edge – it shows you’re modern, up to date with trending benefits and values the wellbeing of your employees. This in turn attracts quality candidates. In fact, recent research has shown that employees will choose a company who has a greater employee benefits program than a company offering a slightly higher salary.
As only 33% of employees are content with their current employee benefits, according to Hays, earned wage access provides an ample opportunity for you to attract top talent with your refreshed benefits program.
Improved employee retention
Financial stress is a leading cause of financial stress, causing 20% of employee turnover in the U.K and U.S. In order to retain talent, employers need to make it impossible to leave through offering the greatest workplace experience possible. This doesn’t mean large bonuses and no rules or regulations, it simply means showing employees that they are valued beyond simply being an employee.
Earned wage access has been shown to reduce employee turnover by 31% because it reduces financial stress and because it shows the employee they’re cared for on a personal level. As highlighted by EWA Digital Solution Research, 89% of employees will stay longer in a company that offers earned wage access.
Boosting productivity
How can earned wage access lead to more productive employees? It’s not just because of financial motivation.
Employees spend over 9 hours a week dealing with personal finance issues, such as credit card debt, budgeting, or worrying about basic living expenses, whilst they are on the clock. Realistically, it’s near impossible to switch off worrying about expenses between 9am-5pm.
The hours employees spend worrying about their financial situation add up and reduce profits, as EY estimates, financial stress costs employers USD$300b p/a through lost productivity.
Eliminating the traditional pay day and providing employees with access to wages on demand can help mitigate their financial concerns, giving them back the time and mental energy required to do their best work for your company.
To better understand how earned wage access would benefit your business growth and workforce, please get in touch with Paytime here.
