Earned wage access (EWA) can go by lots of names, like early wage access, on-demand pay, instant pay, daily pay benefit, or earned income access. But all these names refer to a solution that does the same basic thing: It helps employees access wages they’ve already earned before payday comes. This helps employees manage cash-flow emergencies using their own resources, while avoiding credit card debt or other predatory financial solutions like payday loans.
Earned wage access helps employees, but it’s advantageous for businesses, too. Employee Benefits News named EWA “the most important benefit in a post-COVID-19 world,” citing PwC’s 2019 Employee Financial Wellness Survey which found that “47% of employees are stressed with their financial situation.” By offering EWA, employers can address employee financial stress which negatively impacts the business due to lost productivity and absenteeism. At the same time, this benefit positively impacts retention and the employee experience. Let’s take a look.
The Employee Benefits News article mentioned earlier says that if employees, specifically front-line workers, don’t feel supported and valued then business will suffer. Problems with retention, engagement, and productivity are projected to get worse, which should serve as a big red flag for businesses — because these issues were already cause for great concern. Here’s how offering EWA can help businesses.
Money is the top source of stress among Americans; it ranks even higher than work or personal relationships. PwC’s 2018 Special Report: Financial stress and the bottom line revealed that 50% of employees feel stressed about their personal finances, and half of those surveyed reported spending three or more hours per week dealing with personal finances. Another 12% said they’d missed work more than once to deal with money problems.
For an employer with 10,000 workers, the productivity losses from all this can be as much as $3.3 million per year. An additional $166,000 goes to absenteeism — all as a result of financially stressed employees. It’s important to note that in the PwC survey, the 50% of employees who were stressed about finances said it was mostly because they couldn’t cover emergency expenses. This is exactly where earned wage access can come into play: It helps workers cover emergency expenses using their own money, without resorting to “solutions” like payday loans or predatory credit cards that only make their problems worse. This enables your workers to stay focused on their jobs instead of wondering how they’ll handle a financial crisis.
Data shows that when employees feel heard, supported, and taken care of, they stay at their jobs longer. In addition, companies that monitor the health and public sentiment around businesses note that companies which focus on workers’ well-being — specifically their financial security — fare better. Offering Even’s employer-sponsored EWA solution has helped companies make great strides in this area:
By offering EWA to help employees go from stressed and disengaged to feeling taken care of and focused, employers can reap positive business benefits and create stronger bonds with workers. And, employers can receive these benefits at little to no cost: Offering Even’s EWA solution to employees can cost you nothing.
Having access to earned wages is an incredibly important foundation for employee financial wellness. Currently 74% of American workers live paycheck to paycheck; even households making $100k or $150k per year struggle to make ends meet. The Federal Reserve has reported that 40% of Americans couldn’t come up with $400 in an emergency.
If employees who are living paycheck to paycheck and don’t have the safety net of emergency savings, having access to earned wages can help them avoid catastrophe. When bills come due or the car runs out of gas, many workers turn to things like payday loans, predatory credit cards, or overdraft fees.
However, these “solutions” often leave workers much worse off: Payday loans are debt traps, in which borrowers often end up paying back $793 for a $325 loan. Credit cards can pose their own risks, with low rates that can jump much higher, and balances that are nearly impossible for workers to pay down. And overdraft fees have gone up by 56% in the last two decades, from $21.57 in 1998 to $33.36 in 2019.
When employees have access to their own earnings before payday, urgent financial needs can be met without the involvement of financial products that incur more debt, fees, and stress:
By turning to earned wage access in moments of need, employees using Even’s on-demand pay platform have avoided over $150 million in fees and interest that would have otherwise gone to payday lenders, banks, and credit card companies.
In August of this year, leading publication for fast-casual dining businesses QSR Magazine recommended EWA as a way to offer employees security and stability, saying, “Any sort of consistency or stability you can provide will go a long way. Earned wage access, where employees can access a portion of their earned wages ahead of their scheduled payday, is a benefit that can offer that.”
Earned wage access helps stabilize employees in the moment. A financial wellness solution that includes earned wage access among other features — like planning, spending, budgeting, and spending — is what will help your employees achieve true financial stability.
One of the most powerful things employers can do to support employee financial stability is to help them build emergency savings, so employees can manage their own financial shocks without outside intervention. Earned wage access is the first step; offering additional features to plan and build savings alongside EWA is the whole package.
There are two types of EWA products on the market, employer-sponsored and employee‑paid. The way EWA providers structure their product closely relates to their business model and pricing. These variables impact your employees differently, so it’s important to understand the differences between employer-sponsored and employee-paid EWA.
With employer-sponsored EWA, businesses give employees access to earned wage access by sponsoring it as a financial benefit. That makes offering EWA work similarly to offering traditional benefits such as health care or retirement.
Even is the only employer-sponsored EWA solution available. It also pairs EWA with a suite of planning, budgeting, savings tools designed to help employees climb the financial ladder. So instead of offering just EWA, employers sponsor a financial benefits platform that gives employees access to on-demand pay, automatic budgeting, emergency savings, and more.
Employee-paid EWA means the provider charges employees fees to use earned wage access. Those fees vary depending on the type of employee-paid EWA, the most common models being transactional and pay card.
So, what do these differences in EWA pricing mean for you and your employees? A lot more than it may seem at first glance.
Employer-sponsored and employee-paid EWA are each incentivized to achieve different outcomes. It’s important to understand those incentives and outcomes so you pick the EWA solution most aligned with your business goals and company mission.
Employee-paid EWA vendors profit directly from your employees. That incentivizes providers to encourage increasing EWA usage. This ends up costing your employees much more money when they’re already financially vulnerable. A transaction model vendor could take $14.95 in fees in one month, while a pay card model provider could take up to $24.95.
Employer-sponsored EWA works in the opposite direction. It reduces reliance on earned wage access by pairing on-demand pay with tools like automatic budgeting, emergency savings, and projection. These tools build financial resiliency, giving employees the confidence to focus on planning and saving. As they do, EWA becomes more of a backstop.
To learn more about how to evaluate and select the best EWA solution for your workforce, download our free ebook: Earned Wage Access: A Guide to Getting it Right.
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