Sponsored by: ADP
Employers are looking for new ways to stand out in terms of employee perks and benefits. One solution: earned wage access (EWA). This is a powerful tool when it comes to meeting today’s employee needs. It’s also got proven advantages when it comes to attracting talent and landing great hires right now.
As a problem solver, EWA covers a lot of ground at a time when anything less than a true game-changer won’t work. Combine a 3.5% unemployment rate, more than half a million jobs added in July 2022, the continuing Great Realignment, and troubling inflation, and you’ve got a perfect storm facing employers. Talent strategy right now is a double-edged sword. You can’t just recruit, and you can’t just retain. You need to do both to stay competitive as an organization. That means successfully addressing employee as well as recruitment pain points.
Employees Coming Up Short
From a workforce perspective, financial anxieties are weighing heavier than ever for countless employees. A recent PwC financial wellness survey of more than 3,000 employees across several industries found that just 42% felt their compensation was keeping up with the rising cost of living expenses in 2022 — down from 52% in 2021. Further, 56% of all employees are stressed about their finances.
What that means in practical terms is that for most, access to pay can make a key difference. Research by ADP on earned wage access benefits in today’s world of work found that 69% of employees are likely to request their wages early at least once within the next year. Requesting wages early is prevalent for a clear majority of Gen Z and Millennial employees. But, this is also true for nearly half of older employees as well:
- Gen Z (18-24) 74%
- Millennials (25-44) 86%
- Baby Boomers (45-64) 48%
Here’s the question: What happens if an organization doesn’t have a system in place to grant such a request? In terms of well-being, it will add to the financial stress already affecting employees — and that can have all sorts of consequences. The PwC study’s respondents said financial stress took a severe to major toll on their mental health (34%), sleep (33%), self-esteem (30%), physical health (23%), and relationships at home (21%). Additionally, 18% said financial stress interfered with their ability to be productive at work. 15% said it directly affected their ability to go to work at all.
Employee Stress = Organizational Stress
It’s not hard to connect the dots between financial stress and organizational stress. An organization that lacks a policy and/or system for early wage access could be conducting a not-so-subtle form of self-sabotage even in terms of operational success. In terms of employer reputation, it’s even clearer. Employees want to work for an organization that clearly cares about their well-being — including their financial well-being.
The PwC survey found that 76% of financially stressed employees are likely to look elsewhere for an employer who cares, versus 38% who aren’t financially stressed. To put it bluntly, financially stressed employees are twice as likely to search for a better employer. By inference, then, if you’ve got a skittish, stressed-out workforce and no means to ease their financial stress, you’re twice as likely to lose talent to someone who has the means in place. And what about landing new hires in the first place? ADP research found that over 90% of employers (all with more than 1,000 employees) who offer EWA find that it improves their employees’ sense of financial security and helps with both talent attraction and retention.
EWA as a Solution: Best Practices
Earned wage access is both a digital innovation and a well-being booster — and its time has come. It fits into the framework of modern employee expectations in a range of ways. It pragmatically demonstrates that the employer values employee needs, and it solves a very human conundrum with a practical digital tool. Additionally, it breaks the mold of traditional talent management for a more innovative, flexible approach. But like any innovation, there are strategies that will leverage its full potential and strategies that won’t.
Here are four important best practices when it comes to incorporating EWA into your organization:
- Consider EWA from a business standpoint: A well-designed, modern EWA program offers an inarguable business advantage. Recent ADP research on earned wage access benefits surveyed 500 companies with more than 150 employees and found that 95% believe that employee financial wellness impacts their company. Suppose EWA is provided as a system that offers a simple, self-driven, well-documented means to access pay early. In that case, it can offset a myriad of problems, from employee-manager friction to accounting snafus to attrition.
- Integrate EWA into existing compensation and payroll processes: Rather than a bolt-on solution that’s isolated in terms of data, record-keeping, and information systems, EWA should be interconnected with the processes already in place. Ad-hoc doesn’t have to mean anarchy. EWA is best when it keeps pay administration both simple and cost-effective. Offering employees flexibility and choice that doesn’t complicate the process. Employees should be able to access their wages without disrupting the integrity of the payroll cycle.
- Provide employees and managers with the features that count: For employees, that could mean easy enrollment, a straightforward, anytime, mobile-friendly platform, fast access to pay, clear visibility into pay balances, and electronic pay.
- Don’t be shy about informing your workforce: Companies that offer EWA are staying on the leading edge of digital transformation. They’re also demonstrating an evolved approach to compensation. But competitive pay doesn’t just mean the highest salary in a given role in a given industry. It means a flexible, responsive compensation program that eases minds. As far as retention, that’s going to have a big impact: 93% of employers believe that offering EWA helps boost employee retention. But unless you broadcast the policy, employees and new hires won’t know it. Given all the pressures we’re under, it’s not a time to be quiet about modernizing your employee perks.
Empathy as an Organizational Benefit
With more employees than ever living paycheck to paycheck, earned wage access enables your employees to avoid the friction (and stress) around having to ask a manager for an advance on pay or take out a high-interest loan to tackle an unexpected financial burden. It also takes managers out of the hot seat by providing a built-in, integrated process.
No question: digital innovations are pushing the envelope on how we work, evolving traditional structures like workspace and compensation into more people-centric approaches and offering new solutions to a range of challenges. But rising to the occasion and leveraging these new tools is up to the organization. A digital EWA platform offers a means to address a very human need. It’s a clear example of empathetic people management — and it could be the competitive edge in terms of talent.
To learn more about EWA, ADP is hosting a webinar on “Offering Earned Wage Access: Strategic & Compliance Considerations”, Thursday, September 8, 2022, 2p Eastern. Register Here!