Earned wage access (also referred to as EWA) empowers employees to take control of their finances. This is because it gives them instant access to their earnings when they need it. But there are business benefits too. EWA can lower staff turnover, help you fill vacancies faster, and increase staff productivity. Read on to find out the biggest business benefits of earned wage access.
First of all, what is earned wage access?
Earned wage access or ‘on-demand pay’ is a way for employees to access the money they’ve already earned without having to wait for a set pay date.
Some of the largest retailers and hospitality businesses in the UK have partnered with earned wage access providers as part of their financial benefits packages.
Despite its surging popularity, some people have reservations about this new way to pay employees. So let’s pull it apart and take a deep dive into EWA and what it means for both employees and the companies they work for.
The business benefits of earned wage access
If you’re wondering whether earned wage access can benefit your business, read on.
1. Improved financial wellbeing: The number one business benefit of earned wage access
Money is one of the primary causes of stress. Nearly half of all employees worry about being unable to meet costs in an emergency because of the time gap between expenses and payday.
Consequently, it makes sense that employees who are worried about their finances struggle to focus on work. 80% of workers think feeling stressed about money hinders their performance at work.
Rigid (usually monthly) pay dates can lead to a ‘payday millionaire’ mindset. This is where people spend a large lump of their salary shortly after payday. To make ends meet, they turn to expensive loans later on in the month.
Almost 43% of employees spend half of their monthly salary within 24 hours of being paid, according to research by Portafina. This ‘feast’ is inevitably followed by a period of ‘famine’.
Bills and expenses don’t fall neatly at the beginning or end of the month when it’s payday. In fact, we wrote an entire article about how monthly pay cycles leave employees stressed out.
By offering your employees earned wage access, you can ease their money worries and help them focus on their work.
EWA puts an end to ‘payday millionaire’ thinking and gives employees the peace of mind that they can access their earnings to pay for something unexpected if they need to.
2. EWA can help you fill job vacancies faster
For most employers in the UK, the cost of recruitment rose by 75% between January and September 2021. The average price of recruiting a new employee is now £3,000. This is because of the countrywide skills shortage.
With mounting recruitment costs and few people with the skills that businesses need, it makes sense to up the stakes and make your offering more attractive.
According to research carried out by Ernst and Young, 80% of employees would like some kind of immediate earned wage access. This flexible pay method would help employees cover emergency costs and budget better.
Similarly, the study also found that 60% of people would look more favourably at an employer who offered on-demand pay. So, listing EWA as a benefit when you advertise a position can give your company an edge in a competitive market.
Because on-demand pay from Openwage is free for employers, it can help you attract the right talent without costing you a penny.
3. EWA can help increase employee retention
Financial wellbeing is climbing up the business agenda. Money worries seriously affect people’s mental health, preventing them from sleeping and making them feel generally unwell.
That’s not all. Stress, anxiety and depression accounted for 55% of days taken off work in 2019/2020.
As a result, more organisations are looking for employee benefits that can support employees with their finances. Companies that offer earned wage access are showing they care about the financial wellbeing of their employees.
When a company takes practical steps to reduce employees’ financial stress, it can encourage feelings of loyalty and engagement among employees. In turn, this can have a positive impact on employee retention.
4. EWA can help increases work productivity
As we’ve discussed above, financially stressed employees find it difficult to concentrate on the task at hand. So removing the causes of the financial stress can help employees feel more content.
Research carried out by British Telecom and Oxford University found that happier employees are 15% more productive. Productivity drives business growth by reducing operational costs as productive employees do more work in fewer hours.
One of the biggest business benefits of earned wage access is that you can reward your employees as they work. This helps to build a more motivated, financially empowered, and happier workforce.
5. EWA offers a new level of flexibility
Since the pandemic, flexible working has become a priority for employees. According to a report by Ernst Young, more than half (54%) of global employees would consider leaving their job if they weren’t given some form of flexibility in where and when they work.
In response, many employers are offering flexible working hours, hybrid working models, and flexible benefits packages. So, it makes sense to offer employees flexibility in how they can access the money they’ve earned, too.
Immediate earned wage access also offers employers flexibility. You can decide when to offer EWA to your employees. For example, you might offer it as a reward for meeting certain performance targets or set it up for all employees when they’ve completed their probationary period.
6. EWA can help your employees make better business decisions
Employees feel empowered to make decisions about their money instead of rigid pay cycles dictating when they receive their earnings. Not only does this help to reduce employee financial stress, it boosts their sense of wellbeing, too.
Confident employees who aren’t under financial stress can focus on work and are less likely to make costly mistakes. They’re also more likely to contribute valuable ideas to their organisation.
The ability to think clearly and make the right decisions is critical for business success. According to the first Business Decisiveness Report by Capgemini, the average senior executive makes 20 crucial decisions every year.
Incredibly, the average value of each of these decisions is £160,267. So poor decisions, or failing to make decisions at all, can cost an organisation hundreds of thousands of pounds a year.
7. EWA can create a more financially resilient workforce
On-demand pay and EWA help employees to build financial resilience. You can read about what financial resilience is and why it’s important. But in short, it’s about the ability to absorb a financial shock.
A financial shock could be an emergency expense like dentist treatment or another unexpected bill like a parking fine. Similarly, surging energy and fuel prices are destabilising people’s finances.
On-demand pay helps to create financially resilient employees. This is because it gives employees more control over their finances because they can decide when to get paid.
This can be particularly useful for areas of spending, like fuel. With the rising cost of petrol and diesel, employees must somehow find extra money to pay for travel, knowing they won’t be ‘reimbursed’ until payday.
Flexible pay can ease people’s financial burdens because they can access the money they’ve earned when they need it. By offering on-demand pay, you can help your workforce (and your business) withstand the financial challenges we all face.
Discover on-demand pay with Openwage
With Openwage, offering your employees financial empowerment comes at no cost to you. There are no earned wage access fees for employers to pay and no recurring costs to meet. On-demand pay is totally free for employers.
What’s more, Openwage on-demand pay is quick and easy to set up. There’s no impact on your payroll and we’ll walk you through every step of the way to set up your account.
To find out more about the business benefits of earned wage access for your business, please get in touch today or request a demo.