Yahoo Finance Earned Wage Access: What Is It and Why Is It Important to Permanent and Seasonal Workers?
As noted by Neighborhood Trust Financial Partners, nearly 50% of American workers suffer from financial stress, resulting in poor sleep, lower quality of work, depression, anxiety and panic attacks. Personal finance is consistently ranked as a leading cause of employee stress in the U.S. every year.
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As companies attempt to retain workers and accommodate their desire for increased flexibility in work and pay schedules, many are adopting new strategies to benefit their workforces, whether consisting of permanent or temporary and seasonal employees.
Earned wage access (EWA) is a relatively modern payroll strategy, and one that has risen in popularity alongside shifts in work hours and location caused by the pandemic. Growing sentiment toward flexibility has helped EWA evolve into an established, mutually beneficial business practice and worker incentive — and EWA is now often included as a part of a many employees’ benefit packages.
What is Earned Wage Access?
Earned wage access is a B2B2C (business-to-business-to-consumer) model provided by companies to their workers, enabling them to access their earned wages on an on-demand basis, without the inconvenience of a strict pay schedule.
As opposed to having to wait weekly, biweekly or monthly for their pay, workers can access it any time of the month. As Forbes stated, this adaptable system doesn’t affect company cash flow because it is monitored and funded by third-party software providers plugged into the company’s payroll ( and time and attendance) data.
Benefits of EWA to Employees
According to a recent LendingClub report, the number of American workers living paycheck to paycheck has recently increased 12% — from 52% in April 2021 to 64% in January 2022. As the U.S. workforce continues to face cash flow shortfalls and unexpected economic realities, like increased consumer prices and 40-year-high inflation rates, employees are looking for solutions to persistent financial instability.
Because many jobs cause a reliance on debt, EWA makes it easier for workers to better manage their day-to-day finances, buy life’s essentials when they are needed, pay bills on time and avoid late fees. Instant access to wages can help employees start saving rather then be reliant on predatory payday loan merchants that charge exorbitant service fees (ranging from around 30% to over 600%, depending on the state in which you live, per CNBC’s Make It).
Benefits of EWA to Employers
Now, more than ever, employers are recognizing the importance of an employee’s workplace and financial wellness — and are thinking outside the box to provide benefits for a healthy workforce.
Per an ADP (Automatic Data Processing, Inc.) Earned Wage Access whitepaper, workers that are financially stressed lose about a month of productive workdays each year and are twice as likely to look for new job opportunities. Using a flexible EWA pay strategy can pay untold dividends for companies trying to improve recruiting, lower employee turnover, decrease absenteeism and boost worker satisfaction and production.
“As an employer, your employees’ financial problems become your financial problems,” said chief human resources officer for CareerBuilder Rosemary Haefner. “If workers are constantly thinking about their financial struggles, their quality of work can decrease, and it can take a hit on their morale and productivity.”
According to ADP research, 96% of employers offering EWA said it helps them attract talent, 93% claimed it helps retain workers and 96% stated that their employees like it and it improves their sense of financial security.
EWA and Seasonal Workers
Work schedule and pay flexibility is decidedly appreciated by holiday seasonal workers (and their bosses, too). As Legion noted in its 2022 Seasonal Hourly Workforce Report, the National Retail Federation estimates that the retail industry alone employs about 500,000 seasonal holiday workers. So, the temptation to leave a job for any improvement is a constant option for workers — and a hiring and retention challenge for employers.
Per Legion’s study, EWA interest and practice is growing. A substantial 37% of seasonal employees surveyed said they would change jobs if earned wage access was offered (second only to having a schedule that matched their preferences, at 49%). In a June 2021 study, only 2% of hourly employee respondents stated they would quit a job if they couldn’t be paid early.
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There is an growing desire among both workers and employers to adopt EWA strategies. If implemented with a focus squared on flexibility, low complication and cost, EWA can be a win-win for employers and members of their team.
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This article originally appeared on GOBankingRates.com: Earned Wage Access: What Is It and Why Is It Important to Permanent and Seasonal Workers?
