From quick-serve restaurants to manufacturing, earned wage access (EWA) is gaining popularity among businesses in practically every industry. EWA, the financial wellness benefit that allows workers to access earned wages instantly, has helped employees address short-term financial needs or emergencies that arise before payday. Since the payment is money that's already earned, there's no interest to repay or extensive forms to fill out.
While earned wage access is enticing to workers, employers who offer EWA are seeing benefits as well. By offering financial flexibility with EWA, businesses have been able to reduce key areas costing HR departments:
1. Employee Turnover
Employee turnover is one of the biggest costs for employers in all industries. It's estimated that the cost of replacing an employee is 33% of a worker's annual salary. For the HR department, the loss of an employee results in additional work. When the employee leaves, HR conducts an exit interview, processes the termination, and takes care of any remaining benefits. To fill the empty position, the team must advertise the position, review resumes, conduct interviews, and provide orientation for the new employee. The entire process requires a lot of paperwork and countless work hours.
Earned wage access motivates workers
EWA has a significant effect on the cost of employee turnover by providing the incentive employees need to stay. Giving employees control over their earnings is a way to offer financial stability and peace of mind. While some people argue that instant pay will promote irresponsibility, results of those using the program already show the opposite effect, with only about 20 percent of employees accessing available pay per month.
While the majority of Americans live paycheck to paycheck, hourly wage earners often face changing schedules and unpredictable paychecks. EWA can mean the difference in paying a monthly bill, taking care of an emergency, or even putting gas in the tank to get to work. The ability to meet these needs gives employees the financial stability they need to feel secure in their current position instead of seeking other employment.
2. Requests for Payday Advances
Sometimes, when an unexpected financial emergency comes up, workers have nowhere to seek help except for their employer. Options like payday loans or credit cards can quickly get expensive when you consider the interest rates. Even worse, without the right credit score, those options might not be available at all.
Employers can see the value in helping employees under financial distress. However, payday advances can be tedious and time consuming, resulting in additional administrative time from your HR staff. If implementing in-house, employers are providing the advance and cost of capital, which can impact the employer’s cash flow. While some employees are comfortable for asking for an advance, others who desperately may need one may not. All of these complications mean a simple loan requires a great deal of effort from your HR staff.
Earned wage access cuts through the risks
Since earned wage access comes from a third party provider, employers and HR staff are cut out of the equation. Instead of complicated requirements, interest costs, and potential compliance issues, employees can access the advance directly from an app on their smartphones. This removes the stigma from asking for an advance and employees can get the funds they need to address their financial issue. Depending on the frequency and the number of employees seeking payday advances, HR savings could be substantial.
3. Managing Employee Shifts and Hours
Managing a schedule for the entire workforce of any business takes a significant amount of time and resources. Busy managers or HR staff spend an average of 25% of their time creating the employee schedule or making sure all shifts are filled each week. While this isn't technically wasted, it is time that could be better spent.
Earned wage access empowers employees
Earned wage access provides incentives to employees in more ways than one. The ability to collect wages immediately can entice workers to volunteer for additional shifts. The result is fewer absences and staff that are willing to work to earn the money they need to fill income gaps.
4. Employee Recruitment
Attracting new talent to your business can be difficult. As employees seek more useful benefits and a better work/life balance, employers are changing the recruitment game to entice them. This can mean fierce competition when it comes to attracting qualified workers to your business. Inflating pay can lead to fewer employees or fewer hours for employees, leaving you understaffed during your busiest moments. Offering benefits can be tricky because it's difficult to determine the needs of your potential employees.
Earned wage access makes hiring easier
Earned wage access provides many great benefits over time, but recruitment often means concentrating on the immediate needs of your new employees. Luckily, EWA is a great perk for new hires. Beginning a new job often comes with the dreaded delayed first check. This can be a big problem for employees who have been out of work or are experiencing other financial distress. Hourly wage earners often need cash sooner rather than later when changing jobs. For this reason, EWA can literally seem like a lifeline for workers seeking a new job.
5. Employee Engagement
Disengaged employees cost your business in more ways than one. In fact, $350 billion dollars are lost each year to lost productivity of disengaged workers. Engaged employees increase production, decrease turnover, and become natural advocates for your company. While most business owners and managers are familiar with these numbers, solving the problem isn't easy. The job of determining the exact methods to engage employees falls to human resources. The trial and error approach to reaching the employee engagement goal costs employers both time and money.
Earned wage access boosts engagement
With more than 75% of Americans living paycheck to paycheck, it's no wonder your workers are stressed. This financial stress can have a big effect on employee concentration and engagement during the workday. Financial stress leads to a 34% increase in absenteeism and tardiness. When your employees do make it to work, their minds may be on their finances instead of the workload. In fact, 34% of Gen X workers, 16% of baby boomers, and 37% of millennials admit to being distracted by their finances at work. EWA can eliminate these worries by providing employees with more power over their finances. Additionally, a healthier financial lifestyle can help employees feel more engaged in their current position of employment.
6. Red Tape and Paperwork
Many of the tasks performed by your human resources staff are related to payroll or governed by compliance. This means each task requires careful documentation. When your HR staff completes a termination, new hire, or payday advance, there are numerous documents to be filed related to each task. In other words, HR spends a significant amount of time taking care of the problem, then must spend even more valuable work time documenting the process.
Earned wage access cuts through red tape
While there is no way to completely eliminate the documents that need to be filed by HR, EWA can certainly reduce the load. The reason is simple: an EWA solution can streamline and implement these ad hoc requests. Empowering employees often leads to higher job satisfaction. As engagement and attendance increases, other cumbersome documents are reduced as well. Signing up is an easy one-time process, and employees sign on independently from their smartphone at their convenience.
EWA can reduce the workload for HR staff in many ways. It's a great way for companies to save money and free up time for human resources to tackle other important jobs within the company.
For more information about the ways early wage access can empower employees and reduce burdensome managerial and HR tasks, contact Branch today. Leading your employees toward financial stability provides you with a stronger company and happier, more confident workers.