4 Solid Reasons Why You’d Love Earned Wage Access
Why Earned Wage Access (EWA) bridges a gap and a sustainable solution?
Traditionally payroll has been on fixed payroll cycles and largely one paycheck per month is the norm. While salary is being paid in arrears, our consumption and bills happen daily. However, a good proportion of workers either live paycheck to paycheck or lack significant savings, causing cash flow challenges during the time between pay cycles resulting in financial stress.
That’s one factor fuelling the global payday loan market which is huge and growing rapidly. Workers who need help between paychecks turn to payday loans or other similar solutions but these usually come at a steep cost — excessive interest rates, high fees and most of all a great risk of entering into debt traps.
What is Earned Wage Access?
Earned Wage Access (EWA)— a mix of fintech and HR tech,— was birthed in the US in the 2010s and has since experienced tremendous momentum across developed and emerging markets in recent years. The concept of EWA is simple—giving employees immediate access to a portion of their salaries as soon as they have earned them, rather than having them wait till their next scheduled salary day. Companies that provide these on-demand pay services to employees are solving real-world problems with innovative solutions.
Benefits of Earned Wage Access
1. Reduces the financial stress of employees
Based on a PWC survey, with the ongoing global instability and inflationary climate, many employees are feeling the pressure of meeting their day-to-day financial needs.
Only 42% said their compensation is keeping up with the rising cost of living expenses.
1 in 4 full-time employees is working more jobs than in previous years to make ends meet. 56% are stressed about their finances.
46% of employees say that financial challenges cause them the most stress in their lives.
More than 2/3 of financially stressed employees struggle to pay their bills each month.
Employees said that financial stress caused them issues with their health (28 %) which translates into healthcare costs, negatively impacted their productivity at work (22 %), and led to missing work occasionally (12 %).
43% of employees spent 3 or more hours per week thinking about or dealing with financial stress.
EWA can significantly reduce that financial stress being a first line of life buoy letting employees get their money when they most need it—without having to resort to credit or worse predatory means.
2. Powers up employees’ productivity and engagement
Reducing financial stress means employees spend less time being concerned about their money, increasing productivity and morale.
Assuming 3 hours or more productivity/ week, at an average wage of $17.50/ hour, that translates to over $2,600 more productivity per employee/ year.
Leveraging on EWA is a win-win strategy for employers and employees. While financial stress is alleviated for your employees, as employers you get to:
Create a flexible pay system that feeds a company culture of supporting and empowering your employees.
Increase productivity and employee morale throughout your workforce.
Run your business that’s socially considerate and responsible, when all have a role to play in the ESG call.
Boost your employer brand, helping you attract and retain the right talents.
Automates time-consuming financial aid requests like ad-hoc pay advances.
3. Increases your odds of winning the recruitment and retention war
EWA demand has been gaining footing globally, and candidates are seeking out employers that offer immediate access to their earnings.
Based on our partner Payd’s statistics- around 20-40 % that have access to EWA use it each pay period- mainly to meet daily needs like buying groceries and bills settlement.
In a Visa survey, 95% of employees would be interested in working for an employer who provides EWA and value employers who offers EWA . This has a positive impact on your employer brand—how working for you is perceived by job applicants. As EWA awareness grows, your choice to offer EWA will help you stand out from your competitors.
Attracting new applicants to your job roles is only part of the challenge—once you’ve hired them, you want to keep them. EWA can help with employee retention, too:
Based on HR Dive 77% of HR leaders say that reducing staff turnover is a critical priority.
According to PWC, EWA improves employee retention rate by 36%.
The cost of a new hire is estimatedly 1/5 of their annual salary, meaning it’s critical to minimize turnover in your workforce. EWA helps you to retain your skilled staff and reduce your HR costs and training resources.
4. Swift , simple and zero-cost if not cost-friendly to roll out
EWA can be seamlessly easy to integrate into your HR system. While you may have some concerns, our experience shows that:
HR processes don’t need to change and it is regular payroll prepared as usual
Friyay is compatible with most HRMS systems and we partner just as seamlessly with your outsourced HRMS vendor
EWA benefits all stakeholders—cementing the long-term success of your business, your employees. When you take care of your employees’ top priority, likewise they will take care of your customers’ too. So get in touch with us today to learn how to get started!