Rounding it up
Earned wage access (EWA) allows employees to access money before a scheduled payday.
However, EWA is not a loan because employees can only access money they’ve already earned through prior work.
EWA is also advantageous to employers as it can save them money in the long-term.
That’s because early access to earned wages increases employee satisfaction and retention.
Employers searching for a flexible way to pay their workers are increasingly relying on a payroll feature called earned wage access (EWA). By giving workers better access to the money they’ve already earned before a scheduled payday, this system ensures they have money in their pockets whenever it’s needed.
What are the benefits of EWA for workers, and how can employers benefit from this system as well? If you’re a company wondering these very questions, you’re in the right place.
A more flexible payment system
From on-demand pay to earned pay access, there are many different names for earned wage access. But they all refer to one simple system—one that allows workers to access the money they’ve earned before the scheduled payday arrives. This means that workers who would normally be paid on Friday can instead access their money on Thursday if they’ve already earned it earlier in the week.
The fact that workers can access the money they’ve earned almost immediately is why EWA systems are popular with professionals. Rather than having to wait until payday, they can afford to pay off their bills or buy groceries as soon as they’ve earned the money by working. Those looking for a simple way to budget enjoy this system because it ensures they have access to the cash they need to meet their daily or weekly saving needs.
Employers also enjoy a more flexible payment system. Companies that allow workers to access the wages they’ve earned before payday are building a healthier workforce. Keeping workers out of debt is essential for long-term success in the world of business. Those companies that ensure their workers get money whenever it’s needed after it’s been earned will avoid developing a debt-shackled workforce.
It’s perfect for modern companies
Businesses that fail to innovate won’t last for long. Modern companies are always on the lookout for the next big thing. In this case, EWA allows these companies to modernize their payroll system without sacrificing productivity. In fact, productivity may increase because workers tend to be more motivated when they feel they’re being adequately compensated.
Employees who enjoy access to flexible payment systems also stick with a company for longer. Many businesses spend huge sums of money recruiting and training new workers who seldom stick around for the long haul. With EWA, workers feel as if they’re valued and stay at the company where they can develop new skills and become more productive than ever before.
Modern companies that care about the long-term financial well-being of the workforce also benefit from EWA. Professionals who have instant access to the funds they’ve earned have greater freedom to invest and save. As an example, they may begin to save for retirement at an earlier age because they have more money at their immediate disposal. Before long, they’ll be financially secure and well on the way toward a happy retirement. Businesses that can offer this attractive lifestyle to prospective employees will attract the best talent around.
Financial peace of mind will also ensure that your workers get into fewer disputes with their fellow employees. HR departments will be thrilled to discover that costly workplace conflicts can be avoided when employees feel they’re being paid fairly and frequently. EWA systems thus pay for themselves over time.
Avoiding common misconceptions
Many companies still refuse to invest in EWA due to common misconceptions and fuzzy understanding of how it actually works. Let’s debunk some of these myths.
1. Making money available leads to frivolous spending
Some business owners may fear that employees will never save if they have instant access to the money they’ve earned. Weekly or monthly paychecks, the argument goes, are better for long-term financial health. In reality, easier access to wages is the superior system.
Workers who don’t have easy access to their money could soon drown in debt, unpaid rent, and accumulating bills that may carry stiff late fees. Giving them immediate access to the money they’ve earned grants them financial flexibility. Once they’ve dealt with their immediate economic concerns, they can focus more on the future and make prudent saving decisions. This is particularly important right now when many workers are struggling with pandemic-related financial issues. Managing finances in uncertain times is easier when you have instant access to the cash you’re owed.
2. Workers will cut and run
Other businesses fear that EWA will lead employees to take their money as soon as they’ve earned it before leaving the job. They worry that they’ll be left without the workforce they need to meet consumer demand. What they fail to understand is that EWA actually increases employee retention. Workers who can get their hands on money as soon as they’ve earned it stick around with the same company for longer periods of time.
In fact, EWA can increase employee retention by as much as 19%. This translates to about $2,300 in savings for each employee with access to their earned wages. Rather than draining the workforce, EWA enriches and expands it.
3. Financial advances are bad practice
It’s not uncommon for businesses to avoid financial advances. They don’t like to part ways with money before it’s earned. What this fails to take into consideration is that EWA systems aren’t providing advances. Workers in the system are only entitled to access the money they’ve already earned by working. They’re simply receiving their payment ahead of a scheduled payday, rather than receiving it before the work itself is complete.
A rigid payday system isn’t good for workers or employers. EWA systems allow both parties to come out on top without gaining an unfair advantage over the other.
4. This system will scare off new workers
Finally, some companies are grappling with a fear that EWA will confuse prospective employees. They claim that an instant access system is too complicated for new workers to understand. The truth of the matter is that EWA systems are incredibly easy to familiarize yourself with. New workers—especially younger professionals—are happy to work with digital payment systems that give them access to money as soon as they’ve earned it.
Waiting around for payday is quickly becoming a thing of the past. Companies that want to be competitive when it comes to recruitment need to listen to younger workers. Professionals are interested in digital payment systems that are flexible and fast—and that is where EWA excels.
Rejuvenate your workforce with EWA
So, we’ve covered how earned wage access works, who it benefits, and why it’s an attractive option for modern companies. Whether it’s minimizing turnover expenses or giving financial freedom to workers, EWA is great for both employers and employees.
EWA systems help free your workers from debt simply by giving them access to the funds they’ve already earned. It shows that you respect the contributions they make to the company and that you’re eager to work with them to ensure a better financial future for everyone. Enlist the help of an EWA system, and your company will soon be powering ahead like never before.
Ryan Severance is a professional freelance author and the owner of American Scribe LLC. With degrees in political science and socio-legal studies, he writes about business, politics, and law for clients around the world.