Unlocking Financial Freedom With Earned Wage Access Unlocking Financial Freedom With Earned Wage Access

Unlocking Financial Freedom With Earned Wage Access

Unlocking Financial Freedom With Earned Wage Access

Author: George Gresham | Originally appeared in Forbes.

May 13, 2024 -- The economy may be showing signs of strength, but employed Americans are still feeling the squeeze when it comes to their finances—and that could be affecting productivity for your business.

Despite the U.S. Department of Labor’s unemployment report (showing unemployment under 4% for 26 straight weeks in the first quarter of 2024—the longest streak since the 1960s) and other positive economic indicators, American workers remain stressed about income and their ability to cover basic needs and expenses. In fact, a 2023 PwC survey showed more than half of U.S. workers cite increased expenses as a top concern, and nearly half find it difficult to pay household expenses on time each month.

The angst around making ends meet should concern employers, too, as financial stress on employees can also have implications in the workplace. Individuals citing financial stress report losing 11.4 hours in productivity on average every week—amounting to an estimated more than $4 billion lost weekly for U.S. employers.

As we continue to navigate the evolving post-pandemic economy, there are tools businesses can offer employees to support their short-term financial needs and reduce everyday stress, and potentially boost business productivity, as well. Earned wage access (EWA) is one such tool that may help employers bridge this gap.

Improving Financial Wellness With Earned Wage Access

EWA is a type of on-demand pay enabling employees to obtain a portion of their earned wages outside the standard pay cycle. This short-term access to funds can free consumers from having to rely on alternative financial products to survive and solve liquidity issues many families are facing. And by offering EWA, companies are supporting workers with greater financial stability and enhanced overall job satisfaction—leading to increased employee retention and improved workforce morale.

On-demand pay is the next generation of financial flexibility, enabling workers to match their wages more closely to real-life expense cycles. A recent survey conducted of workers who use EWA through their employers demonstrates its value:

  • 65% of survey respondents said EWA is a benefit that is very important to them.
  • Respondents said it is nearly as important to them as retirement/401(k) (83%) and life insurance (79%).
  • Respondents said it helps them pay most of their bills on time (84%), pay off some credit card debt (67%) and put money into savings monthly (57%).
  • Nearly two-thirds (63%) say it has had a positive impact on their perception of their employer.

With EWA, workers gain more control and flexibility over their finances, and employers can benefit from a workforce that may be less stressed.

The Real-Life Impact Of Financial Stress At Work

Again, more and more American workers are finding full-time employment and benefits from employers are not helping them maintain financial stability. According to PwC’s survey, 1 in 3 full-time employees said “money worries have negatively impacted their productivity at work”; only 54% of financially stressed employees feel they have a promising future at their company and are twice as likely to be looking for a new job compared to those who are not stressed; and the vast majority of workers want help with their personal finances.

Multiple income streams through gig work and other jobs are easing this burden for some, but employers should consider the risk of losing talent by not offering benefits to match the current economic environment and needs of their workers and the hidden cost of a less productive workforce.

The Business Impact Of EWA

As EWA grows in popularity, employers are finding financial wellness benefits are becoming critical to remaining competitive in the current job market. In addition to reducing stress and possibly boosting productivity, better benefits can equal higher retention of top talent.

Business leaders debating adding EWA to their benefits should consider the following: In one survey, 95% of workers reported that better employer benefits would positively impact them, driving them to work harder (60%), stay more engaged and productive (58%) and become more committed to staying at their job (34%). And 54% of employees rated financial wellness benefits as their most desired benefit over mental health benefits and flexible time off. For the 86% of HR leaders who say attracting and retaining talent is their biggest challenge, EWA and other benefits aligned with employees’ needs could be just the solution.

However, while EWA is a great retention tool from the employee’s perspective, it’s important that employers interested in implementing EWA consider a few additional key factors beforehand to ensure they’re able to maximize its benefits while reducing risk to the enterprise and its people:

  • Regulatory Compliance: Employers must ensure their EWA program complies with all relevant labor laws and regulations (e.g., fair labor standards, consumer protection, etc.).
  • Tech Integration: Integrating EWA with existing payroll systems can reduce administrative burdens on HR teams and ensure accurate earnings data is available to employees.
  • Transparent Communication: The terms of the EWA benefit must be clear for employees (e.g., any fees or charges associated with accessing earned wages early).
  • Data Security: Employers must guarantee the security of employee data, particularly if working with a third party.
  • Monitoring Usage: Tracking how employees are using EWA will help employers identify any potential issues or trends, including behaviors and usage rates that may require additional support from HR.

In today’s economy, on-demand access to earned income can be a beneficial tool for both employers and their employees, benefiting businesses as a recruitment and retention tool that can boost wellness and productivity. It’s time for us to rethink the traditional pay cycle and meet workers at their points of need with tools like EWA.