Now more than ever, working Americans are looking for ways to gain more financial stability. In the United States today, nearly 80% of people are living paycheck to paycheck, struggling to make ends meet and often derailed by overdraft fees or unexpected expenses. They want to feel like their employer can help them become more financially secure—and there are several ways you have the power to make this happen.
Flexible pay, also referred to as Earned Wage Access (EWA), is one of the methods you can use to improve the financial wellbeing of your employees. Flexible pay lets your employees access money from the hours they’ve already worked—ahead of their scheduled payday. Understandably, this is a meaningful benefit for people living paycheck to paycheck; 80 percent say accessing a portion of their wages before payday would be beneficial.
Still, there’s some confusion in the marketplace around what flexible, on-demand pay actually means for both you and your employees. The following seven statements around flexible pay options are commonly heard—but they’re not all true. Read on to separate fact from fiction when it comes to this increasingly popular financial wellness benefit.
Flexible Pay: Myth v. Fact
1. Flexible pay is the same as a payday loan
MYTH. In reality, flexible pay is not a loan or an advance on future earnings. While payday loans allow individuals to borrow money from a third-party, flexible pay allows employees to access wages from the hours they’ve already worked. Rather than borrowing money through a payday loan, complete with fees and interest rates, employees can use flexible pay to simply obtain the wages that they have already earned—without having to worry about fees or interest.
2. Offering flexible pay helps reduce turnover among hourly staff
FACT. Turnover costs can be staggering. But when your employees have access to flexible pay and other financial wellness tools, a few things happen that affect your retention rates: Your employees have more control over their financial future, and they become more confident when thinking about their long-term success within a company. On average, these factors make employees about 25% more likely to stay at their current company.
3. Employees will be irresponsible if they can get their wages ahead of payday
MYTH. Flexible pay can actually help employees become more responsible, and begin to build up savings. Varying schedules and income often stand in the way of hourly employees’ financial goals. By allowing employees to access their earned wages, you prevent them from having to dip into their savings or retirement accounts when an unexpected situation arises. Plus, among Branch users, only about 15-20% of employees take an advance on their earned wages each month, typically when an unexpected situation arises like a car repair or medical expense.
4. Fees are a common and unavoidable part of flexible pay
MYTH. Flexible pay doesn’t have to be difficult or expensive. Some flexible pay providers claim to be free, but ultimately have a cost burden that hits employers— or worse, hidden costs that hurt hourly wage employees. This has created the belief that fees are entirely unavoidable, but it’s false. There are options, like Branch, that are completely free to both the employer and employees. No one should have to be hit with unexpected fees for helping their staff feel more financially secure.
5. Offering a financial wellness benefit is good for your bottom line
FACT. Not only does offering a financial wellness benefit like flexible pay increase your employee retention, but it increases engagement and productivity as well. Employees with financial stability worry less about finances and focus more energy on work, leading to increased efficiency. On top of that, programs that help short-term financial needs can also result in 60% additional shift coverage. With flexible pay options, employees become more engaged, more productive, and willing to assist the company when needed.
6. Implementing a flexible pay tool is time-consuming and requires changes to existing systems
MYTH. Some flexible pay tools, like Branch, integrate directly with major time and attendance software you already have. This allows for a quick, simple setup without needing to change your systems. You can connect your flexible pay solution to the source of employee data, determine the flow of funds and repayment process, and set any additional guidelines. From there, your employees download the Branch app to begin accessing their wages, direct deposit, and other financial wellness tools.
7. Providing a flexible pay option will change lives
FACT. Flexible, on-demand pay can be life-changing for hourly employees—and for company morale, since providing this benefit increases employee engagement and satisfaction. Your workforce will be happier and feel more supported than ever, and you’ll be able to attract more of the people who can power your business by offering the benefits they find most meaningful.
Ultimately, flexible pay is an option that your employees both want and need. Offering flexible pay not only provides your employees with increased financial stability, but helps your company boost engagement, retention and morale across the board.
At Branch, we've created a full suite of financial wellness tools, including flexible pay, that are both easily accessible to employees and easily administered by employers. The best part? It's easy to set up and completely free. Learn more about Branch with a free demo here.