Earned Wage Access & Financial Wellness

Why making employees pay for earned wage access doesn’t relieve their financial stress

Employee financial stress costs businesses billions in lost productivity. Earned wage access can relieve that stress, but it has to be offered the right way …

Employee financial stress weighs workers down to the equivalent of $4.7B in lost productivity per week, according to BrightPlan’s 2021 Wellness Barometer Survey. That makes relieving employee financial stress a priority for large businesses, especially those who must recruit and retain large populations of hourly workers.

Earned wage access, also known as EWA or on-demand pay, offers a solution. It relieves employees’ financial stress by helping them solve cash-flow emergencies with their own money, instead of resorting to predatory solutions like payday loans or high-interest credit cards.

But to relieve employees' financial stress in a lasting way, EWA should be offered as an employer-sponsored benefit — and that’s not the way most vendors offer it. Instead, most EWA providers charge your employees. Ultimately, this works against relieving your employees’ financial stress, and against your business recovering the productivity lost to all that stress.

1. Employees shouldn’t have to pay when they’re financially vulnerable

Letting an EWA provider charge your employees is like letting a fox into the henhouse. The vendor takes an approach similar to the predatory solutions they claim to replace, just at a different scale.

Bloomberg Law breaks down how employee-paid EWA providers typically charge employees $1.99 to $2.99 per use. Employees typically use EWA to take four to six on-demand pays per month. Based on that, your employees would pay up to $18 per month just to access their own money.

Now calculate that across your entire workforce. For a 30,000-person company with a 30% adoption rate, employees would pay the provider almost $2M per year. That doesn’t sound like stress relief.

Fortunately, not all EWA options are predatory. An employer-sponsored EWA solution like Even doesn’t charge your employees, making sure they keep all the wages they’ve earned.

2. Employee-paid EWA providers need your workers to stay stressed to stay profitable

When a provider profits from your employees’ financial stress, they need your employees to stay in some degree of distress. This feeds employee-paid EWA’s profitability as a standalone service. The more employees use it, the more fees they pay.

Employees only get short-term relief when EWA works this way. Yes, they can now solve cash-flow emergencies with their own money. But with no companion benefits to progress them into planning, budgeting, and saving, employees achieve only minimal relief over the long term, if any.

Minimal relief to employees’ financial stress means minimal impact to retention and employer perception.

Minimal relief to employees’ financial stress means minimal impact to retention and employer perception. And in a labor market reshaped by COVID-19, employees are eager to find relief. PwC’s 2021 Employee Financial Wellness Survey found 72% of employees would be attracted to an employer who cares more about their financial well-being than their current company.

This underscores the urgency for employers to take an approach like PayPal and ask what’s the most they can do to relieve employees’ financial stress, not the least.

3. Employees are still missing rungs to climb the financial ladder

Employees already know what they need to make long-term progress toward relieving their financial stress. Three-quarters (74%) of employees would prefer an employer who offers financial planning, budgeting, and automated savings tools over one who doesn’t according to the Workforce Institute at UKG.

In other words, employees don’t want to feel nickel-and-dimed with à la carte services. Rather, they want a financial benefits platform that gives them access to tools they will actually use.

When financial benefits are thought of as rungs, it becomes clear why employees can’t reach one without another in place.

Take 401(k), one of the most widely offered benefits, but least useful to most hourly workers. Why? Because it’s a rung on the financial ladder that’s too high up. To reach it, employees need other rungs in place:

  • Earned wage access so employees can solve cash-flow emergencies with their own money and establish financial stability.
  • Automatic budgeting so employees have confidence they can cover bills and know what’s safe to spend.
  • Automatic savings so employees can use their financial stability to prepare for the future.
  • Schedule-based pay projection so employees have the visibility to see and plan for changes in hours or budget ahead of time.

When benefits are thought of as rungs, it becomes clear why employees can’t reach one without another in place. This applies beyond hourly workers, too. Nearly 40% of Americans earning $100K or more live paycheck to paycheck according to Lending Club and PYMNTS.

A quick note about 401(k). It offers a cautionary tale of charging employees for financial benefits. Ted Benna, recognized as the creator of the 401(k), isn’t a fan of how companies have diminished the benefit's value by passing its costs onto employees. He told Barron’s, “It went from all fees being paid by the employer to everything getting bundled and dumped on employees.”

Employer-sponsored EWA relieves financial stress while supporting retention and engagement

For your business to recover its share of the $244.4B in productivity lost each year to employees’ financial stress, you need to introduce a solution that:

  1. Takes the burden off of employees to pay for the benefits designed to help them.
  2. Progresses employees up the financial ladder by giving them tools for solving emergencies, planning, budgeting, and saving.

Even does that by giving employees access to a financial benefits platform. This approach packages a suite of tools that help members take control of their money, all from a single app:

  • Earned wage access
  • Automatic budgeting
  • Emergency savings
  • Pay projection

Bringing these tools together helps employees achieve long-term relief from financial stress, impacting your bottom line through improved retention and engagement. Survey results show that:

  • 75% of members say Even has a positive effect on their financial health.
  • 75% of members say Even makes them feel better about their employer.

So far, Even members have taken more than $2.5B in on-demand pay, helping them avoid overdraft fees and predatory solutions like payday loans and high-interest credit cards. They’ve also collectively deposited more than $200M into savings.

Learn more about how Even is helping companies like PayPal, Walmart, and Noodles and Company build financially resilient workforces at even.com.

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