A lot is changing in both the business world and our everyday lives. There are constant innovations in technology, ways of working, buying and having fun. One area of life that hasn’t moved so rapidly is the way we get paid. There are options that try to skate around the problem too many Australians find themselves in every week – it’s a common scenario where workers are met with an unexpected expense between their paychecks. When that happens, they turn to debt. Which often leads to more debt and a cycle of dependence.
There are many reasons why hastening the pay cycle (ie more frequently in a given month) is more costly for businesses than it’s worth, so a solution that allows employees to access their pay sooner and more flexibly while maintaining existing processes is extremely attractive for everyone. Earned Wage Access (EWA) solutions integrate into payroll systems seamlessly and allow employees to view and draw down on a portion of their earned wages whenever they need it, without being charged any interest or late fees. Let’s take a deeper look at why this is such an attractive option for both employees and businesses that want to get the most out of their workforce.
Two weeks, and sometimes four, is a long time to wait
Almost six million Australians are living paycheck to paycheck. When that paycheck only comes every two weeks, and sometimes even four, there is a gap that needs to be carefully planned and budgeted for. While this may be possible under ordinary circumstances, life is unpredictable. Medical costs don’t discriminate and unfortunate accidents and events, such as a broken-down car, happen outside our control – particularly for those who are vulnerable and unable to invest in preventative measures.
For most of these workers, the solution is to use a credit card, use funds from important savings accounts or apply for a potentially damaging payday or consumer loan. Australian households pay an average of $468 in bank fees every year. Much of this is due to credit card charges, overdraft/overdrawn fees and late payment penalties from those living paycheck to paycheck. Banks and other financial institutions make a whole lot of money out of people who already struggle with personal cash flow. The interest charges and additional fees make it very hard for them to break the cycle.
Overseas, global providers such as Paypal have started offering their US employees early access to their earned wages, with their director of compensation Lisa Beyer noting that ‘the use of on-demand pay and the budgeting tools in the app is higher among its hourly workers than salaried workers,’ although even some of them had the same budgeting difficulties. This demonstrates that the issue is both widespread, pervasive and acknowledged by the largest organisations in the world.
EWA just makes so much sense to workers
Offering EWA is an extremely attractive benefit for employees in an increasingly competitive labour market. Where wages aren’t rising, how can employers both lure in candidates and retain their existing workers? EWA may be the answer, and many employers are starting to list and promote it on their job advertisements for a reason. Workers put in the hard yards for their boss when they need it, so it only makes sense that their pay is accessible when they need it themselves.
There are many instances in Australia at the moment of industries experiencing a shortage of workers, particularly hourly-based and rural positions. According to Blackall-Tambo Region mayor Andrew Martin, ‘there’s something like 200,000 vacancies in remote and rural Australia at the moment.’ EWA may help attract talent that appreciates financial flexibility and opportunity.
Keep in mind that there are costs involved. When an employee draws down on their earned wage balance, they will pay a small fee, but its less than the cost of a cup of coffee. Employers are increasingly choosing to cover this cost on behalf of their employees. This effectively creates a true employee benefit that can be used as a critical part of an organisation’s more comprehensive talent acquisition and retention strategy.
When the business takes care of your employees, they take care of the business
It’s also important to consider the reciprocal. Taking care of employees is not a one-way street – they return the favour. Employees that have access to their earned wages before payday are far more productive, loyal and engaged. We have found that employers who offer EWA experience a 25% reduction in employee turnover and improved hours worked per employee by up to 20%. There is a clear link between effort and the reward benefit offered by EWA, with up to 15% higher employee engagement recorded in surveyed organisations. Job vacancies are also filled 27% faster when companies mention EWA – sounds like a win/win, doesn’t it?
How Paytime works for your business and employees
Paytime is a convenient EWA mobile app that allows employees to draw down cash when they need it. EWA addresses the need for employees to have increasingly flexible access to their earned wages to manage their personal finances better. When an unexpected bill arrives, they can easily access a portion of their earned wages to cover any shortfall.
Providing EWA also has massive benefits for organisations. Not only are job seekers almost twice as likely to accept a 13% lower salary when earned wage access is an option (it does not mean you should – but you get the point), but EWA also helps improve workers’ productivity, retention, and engagement. Reduced financial stress eliminates distractions and allows employees to focus on their job throughout the day. Employers benefit from increased employee retention and higher engagement while employees get the wage flexibility they need to improve their financial wellbeing – it’s a win-win!