The concept of earned wage access or EWA is still new. A few years ago, some companies heard of it, and even fewer participated in a program that gave employees early access to their wages.
So, this post will cover what earned wage access is and isn’t, and how it can empower the lives of employees and employers.
Earned wage access: What it is & what it’s not
By definition, earned wage access simply breaks up the regular payroll schedule so employees can get paid early for work by receiving their earned wages before payday.
EWA brings many benefits to both employees and employers, but there are some misconceptions to what earned wage access actually means.
Early wages is not:
- A payday loan
- A payroll replacement
- An advance on any future earnings
Earned wage access allows employees to get their money as soon as they earn it—there are no interest, fees, or additional costs for the employee.
The importance of earned wage access
In 2019, less than 5% of US businesses that employed hourly workers offered earned wage access. By 2023, Gartner expects that number to increase to 20%.
Earned wage access is more than just a trend for the gig economy. It’s on track to become the new normal in the post-pandemic economy.
Giving your employees access to early wages is a win-win for both your business and employees. Your employees get paid early from work, and as an employer, you can use EWA to secure workplace satisfaction, increasing worker productivity.
With the right vendor, there’s no risk for companies that offer earned wage access to employees—only benefits for all parties involved.
How early access to earned wages benefits employees
As of June 2021, 54% of US consumers were living paycheck-to-paycheck.
And the results for the most common income brackets are staggering. 72% of people making under $50,000 and 40% making over $100,000 annually would struggle to pay their bills after missing a single paycheck. 53% of US workers with an income between $50,000 and $100,000 also report living paycheck-to-paycheck.
When employees access pay early, they can start closing the gap between paychecks to pay their bills on time and stay away from the things that hurt their finances like late fees, overdraft fees, and predatory payday loans.
Earned wage access also helps employees meet unexpected expenses to reduce their financial stress.
- 78% of employees avoid late and overdraft fees, thanks to getting paid early from work.
- 70% of employees avoid the need to take out payday loans.
- 59% of employees stay motivated in their roles.
How early access to earned wages benefits employers
Employee financial wellness also has significant benefits for employers. This survey by PwC found that 58% of employees were under financial stress, and 50% of them felt that stress was a distraction at work—contrary to the 16% who didn’t experience workplace disruptions due to their financial situation.
The state of employees’ financial wellness isn’t looking great. And because of that, they’re seeking solutions from their employers—like earned wage access.
Financial stress can lead to various problems in the workplace, including a decrease in productivity, retention rates, and pay satisfaction.
Another survey by PwC found that 30% of employees face distractions at work due to their financial distress and 46% of them spend at least three hours at work each week dealing with personal finance issues. For employers, this means:
- A $3.3 million annual loss due to decreased productivity for businesses that employ 10,000 workers.
- An additional $166,000 loss each year from employee absenteeism due to financial worries.
And for companies that have millennials as a large part of their workforce, the numbers can be even more dramatic. 37% of millennials admit to being distracted at work due to their finances, with 49% spending three or more hours dealing with those problems at work.
Let your employees access earned wages faster with Juice for Business payout cards
Implementing earned wage access and offering employees ways to get paid early has positive implications for both parties. This includes increased employee engagement and productivity and decreased turnover rates.
With Juice for Business payout cards and employer participation, employees can access their pay two or more days early. Learn about the benefits of payout cards and get started with your free Juice for Business demo—see how easy payroll can be.