{"id":12769,"date":"2022-08-31T09:53:32","date_gmt":"2022-08-31T13:53:32","guid":{"rendered":"https:\/\/gtm.com\/business\/?p=12769"},"modified":"2022-08-31T09:53:32","modified_gmt":"2022-08-31T13:53:32","slug":"earned-wage-access","status":"publish","type":"post","link":"https:\/\/gtm.com\/business\/earned-wage-access\/","title":{"rendered":"What is Earned Wage Access and Should You Offer it to Your Employees?"},"content":{"rendered":"

\"earnedWhat Employers Should Know About Earned Wage Access<\/h2>\n

The traditional weekly or biweekly concept of \u201cpayday\u201d is engrained in many workplaces. However, some employers are exploring ways to pay their workers faster, especially those in industries that provide hourly wages or have high turnover rates. As Americans face rising costs for everyday essentials, health care and other emergencies, on-demand pay\u2014also known as earned wage access (EWA)\u2014allows employees to be paid as soon as they\u2019ve earned their wages. In turn, employers are considering how to provide employees with faster access to their earnings. This article explores earned wage access and outlines how employers are using modern payroll strategies to compete in today\u2019s labor market.<\/p>\n

What is Earned Wage Access?<\/h2>\n

Earned wage access is a method of paying employees\u2019 wages as they earn them instead of using traditional weekly, biweekly or monthly pay cycles. Some retail, hospitality, manufacturing and health care organizations are already embracing on-demand pay since most of their employees are paid hourly.<\/p>\n

Earned wage access is projected to grow quickly<\/a> in the coming years. According to research and consulting firm Gartner, less than 5% of large U.S. companies that provide most of their employees with hourly wages are currently using this flexible payment solution. However, that number is expected to increase to 20% by 2023. In today\u2019s fast-paced culture, where Americans can get almost anything with the click of a button, it\u2019s not surprising that on-demand pay appeals to many workers who don\u2019t have a buffer of savings to handle unexpected expenses.<\/p>\n

Earned wage access can create additional administrational work and increase organizational costs (e.g., fees). However, the trade-off is that flexible payroll solutions are generally viewed favorably by employees. With time currently of the utmost value to workers, the ability to be paid sooner can be of high value and potentially provide additional organizational benefits, such as increased attraction and retention levels.<\/p>\n

The Impact of Earned Wage Access<\/h2>\n

Earned wage access is understandably an advantage to employees seeking faster access to their wages. Furthermore, there are some ways that this flexible payroll solution can have an impact at an organizational level.<\/p>\n

Financial Wellness<\/h3>\n

More than 125 million U.S. adults live paycheck to paycheck, according to lending company LendingClub. Additionally, 4 in 10 Americans couldn\u2019t handle an unexpected expense of more than $400 without credit, according to the Federal Reserve. As such, it\u2019s clear that workers value the flexibility of earned wage access. This peace of mind over finances can positively impact organizations through increased employee engagement and productivity levels. After all, employees who do not need to stress about finances often perform better at work. On-demand pay can offer employees access to some or all of their earned wages to help pay bills on time and better manage their living expenses.<\/p>\n

Employee Attraction and Retention<\/h3>\n

Further, earned wage access can be a powerful employee recruitment and retention tool. Simplified access to wages matters to today\u2019s workers. Employees who receive flexible payroll solutions may even want to work additional shifts knowing they\u2019d have instant access to their funds. When employees know they can quickly get paid for their work, they are more likely to stay with an organization rather than taking a slight hourly wage increase from a competitor. Employers concerned about fees associated with on-demand pay should consider how these costs could pay off in the long run by way of decreased employee turnover concerns and higher retention rates.<\/p>\n

Earned Wage Access Execution<\/h2>\n

Modern HR and payroll technology can help employers offer earned wage access. Most employers don\u2019t manually calculate payroll in real time, so on-demand pay is typically executed through a human capital management<\/a> (HCM) system or payroll administrator. Certain technology\u2014such as prepaid payroll delivery services\u2014can simplify and optimize payroll, reduce manual calculation work and improve payment security. Advanced cloud-based technology can also help employers calculate how much employees are owed on the spot and then offer some or all of those wages to employees.<\/p>\n

Employers may use the following methods to pay their employees instantly:<\/p>\n