Why Earned Wage Access is worth getting excited about
Almost every area and sector within the business world has gained from technological advancements and their own versions of the Industrial Revolution in recent years. However, payroll has arguably remained the same, at least to the outside world. The function unfortunately has a reputation as one that is ‘unchanging’, but those within the profession are all too aware that in reality, the sector is full of innovative financial technology. The latest in potentially game-changing transformations taking place in payroll is Earned Wage Access (EWA), which will benefit both employees and employers that adopt the model.
Earned Wage Access: providing a modern pay experience
EWA enables employees to access their accrued earnings at any point within the pay cycle, rather than having to wait for monthly or weekly paydays, granting them much greater financial flexibility than they have ever had. The introduction of this model is particularly timely, with macroeconomic and cost-of-living pressures putting a strain on the vast majority of people’s household budgets.
In a world where we can gain access to all information, our banks, order fast food, and watch content from around the globe, at the touch of a button, the traditional pay cycle model seems outdated.
Before we get into some of the key benefits of EWA, it’s also worth busting a key myth around the payment model. Some commentators have suggested that employees will take advantage of instant access to their earnings and have nothing left by the end of the month, however, evidence from early adopters of EWA models and platforms suggests the opposite is, in fact, true. Staff with access to their pay whenever they want it generally withdraw around £65-£105 each time, suggesting it is used to pay daily expenses, rather than make extravagant purchases. If employer-led financial education is provided as an employee benefit alongside EWA, then organisations will have even greater certainty that their staff are spending responsibly.
Future benefits
But what key reasons are there to get excited about EWA, and how could it benefit adopting businesses and their employees?
Employee and financial wellbeing
As mentioned, financial conditions across the majority of Western countries have created highly challenging environments for all but the highest earners. Access to on-demand pay allows employees to better leverage their earnings and enables them to more sustainably manage their household finances. It can make the difference between relying on overdrafts, credit cards and high-interest loans and being able to pay surprise bills or unexpected costs.
Business recruitment and retention
EWA also benefits employers and can be used as a staff recruitment and retention tool, particularly with younger generations who have grown up with technology around them and instant gratification delivered in every area of life. Data shows that over 60% of Generation Z members would like their employers to provide daily pay models and both this group and the millennial generation have expressed a desire for instant access to their earnings whenever they need it. This means that adopting EWA could help businesses to recruit talent ahead of their competitors and retain key members of staff as competition for talent increases.
Greater flexibility
Post-pandemic employees have become accustomed to the greater levels of flexibility and freedom granted to them by their employers, and this is also reflected in their access to pay and earnings. Offering EWA as an employee benefit demonstrates that businesses are forward-thinking and are providing their staff with the elements they need in the modern world of work. It also avoids potentially embarrassing exchanges if pay is needed earlier in the working month, though perhaps more importantly, it gives people an alternative to costly loans. Most EWA models are available on mobile apps which enables the type of flexibility associated with other areas of life and, if integrated with payroll and other HR-related software, it can deliver simple and straightforward monetary processing in real time.
With the growth of technology and the role it now holds across all areas of our lives, it’s only a matter of time before EWA models are seen as the norm on a global scale and will be expected by the majority as a workplace benefit. Firms that do not keep up with this evolution will lag behind their competitors and struggle to convince talent to work for an employer with outdated processes and archetypal payroll cycles. Payroll has finally had its revolution and it looks set to benefit employers and their staff alike.
