As the U.S. experiences fits and starts with “reopening,” some of the nation’s largest employers are beginning to rehire cautiously. Those new employees are moving cautiously too, still dealing with lost income and upended home lives. That creates an opportunity for employers hiring right now to help their workforce—and stand out from other companies competing for the same talent.

Given the fragile financial state many new employees are in, it’s more important than ever for employers to offer benefits that help employees rebuild their financial lives. Earned wage access, also known as EWA or on-demand pay, is one of the most effective benefits for helping employees build financial wellness. Of all the EWA models available, employer-sponsored EWA helps employees the most over the short and long term.

Many new hires are in critical financial situations

Many of the people you’re hiring right now are starting new jobs as they endure the biggest economic crisis most of us have ever seen. Among Americans with lower incomes, 36% reported household income loss due to the pandemic. Twenty-eight percent of middle-income households said they’d been affected, and 23% of high earners reported losses. Less than a quarter of low earners (23%) said they had enough emergency funds to last three months.

These are people who were already struggling. Now that their financial situations are even more vulnerable, waiting for biweekly pay is more than an inconvenience—it’s a hazard. It's why many employers are turning to EWA to help their workers. It gives financially vulnerable employees access to money they’ve already earned, but haven't yet been paid because of how payroll schedules work. EWA helps employees avoid predatory financial “solutions” like credit cards and payday lenders when they need money before payday.

But before you bring an EWA solution onboard for your employees, it’s important to understand all the facts. Not all EWA solutions help employees in the long run, and some even have the potential to make workers’ financial troubles worse.

Financially vulnerable workers need fewer fees, not more

Earned wage access can be a great asset for workers—but not all EWA products are created equal. Differences in pricing structure, feature set, and even the provider’s business model can have significant impact on your employees.

At a time when new hires may be coming off a long stretch of unemployment—with overdue bills and new debt from making ends meet with no income—employers should look carefully at what fees new employees might pay for EWA.

Earned wage access cost models can be broken down into two main types: employer-sponsored and employee-paid.

Employer-sponsored EWA

Under employer-sponsored EWA, businesses offer earned wage access to their workers as a financial benefit, similar to offering traditional benefits such as health insurance or retirement. It can also be thought of as enterprise-ready EWA because it integrates with existing systems. That makes it possible to track your financial benefits and tie their impact to business goals, such as recruiting, retention, and engagement.

Because employer-sponsored EWA offers the most accessible form of on-demand pay, it means less of employees’ money lost to fees or interest and more going toward their bills and savings. That’s especially true when offering EWA through a financial benefits platform like Even, which pairs on-demand pay with planning, budgeting, and savings tools. That way, employees help themselves climb the financial ladder.

Employee-paid EWA

Employee-paid EWA charges the employee directly as a service. It comes in two flavors, transactional and pay card.

• Transactional — Employees pay to access their wages. Think of it like an ATM surcharge—or more accurately, a series of charges. Employees pay extra for things such as receiving their wages instantly versus next business day. They also pay more for manually requesting on-demand pay versus scheduling automatic transfers.
• Pay card — Employees receive their earned wages on a prepaid debit card. That part is free. But moving the money elsewhere is not. Employees pay a fee to transfer the money to their bank or other account. If they want cash, employees either have to pay extra for cash pick-up, or eat the ATM fees.

If the point of EWA is to help employees build financial wellness, why do employee-paid providers charge your employees when they're most vulnerable?

All those fees make transaction and pay card EWA models significantly more expensive for your employees than employer-sponsored EWA. For a worker who uses EWA about once a week (the industry average), a transactional EWA vendor would charge $14.95 in fees for the month. A pay card provider could take as much as $24.95.

All of this begs a question. If the point of EWA is to help employees build financial wellness, why do employee-paid providers charge your employees when they're most vulnerable?

Financial benefits should be helpful, not harmful

The pricing models described above reveal an EWA provider’s business goals and motivations. Employee-paid EWA providers use transaction and pay card models because they make money directly off your employees. The more employees use EWA, the more the provider profits.

That means employee-paid EWA is incentivized to make employees depend on EWA. Not only does that cost your workers more, but it also works against them building long-term financial wellness.

Employer-sponsored EWA, on the other hand, is incentivized to make employees use EWA less over time. More than 35% of monthly active Even users have never taken an on-demand pay. Why? Because employer-sponsored EWA sees an employer's business goals and employees' financial resilience as two sides of the same coin.

Under an employer-sponsored EWA platform, on-demand pay becomes one tool packaged in a suite of financial benefits. It also connects to automatic budgeting, emergency savings, and pay projection so employees get a 360-degree view of their financial data.

Because as financial stress goes down, productivity and engagement go up. Seventy-five percent of Even members report a positive impact on their financial health, and 76% say they feel better about their employer for offering Even.

Help your business by helping your employees

At a time when your company may be hiring high numbers of new employees, many of whom are struggling to make ends meet, the urge to offer financial assistance isn’t just commendable, or a recruiting advantage—it’s good business. As they struggle to rebuild their financial lives after Covid-19, employees need benefits that will help them build savings and achieve financial wellness. While earned wage access is an important part of this, because it helps workers avoid expensive credit and predatory payday loans, EWA can ultimately hold employees back if employers don’t select the right one.