No matter what the moniker – early wage access, earned wage access, on-demand pay, instant pay, work-today-get-paid-tomorrow – the concept is the same. Employees have control over their cash-flow by accessing the wages they’ve earned early, prior to payday.
Back in January 2020, I wrote an article discussing the pros and cons of offering an early wage access service to employees. One critical element that continues to come to the forefront of the debate is this: is early wage access a service that will lead to improved financial well-being for employees?
Here is my analysis from over a year ago:
The short answer is yes, so long as early wage access is used for its intended purpose. If used correctly the service can provide flexibility to the cash flow of the user and helps them better align incoming funds with outgoing budgeted expenses. Early wage access can not only assist in avoiding unnecessary expenses, it will provide greater financial stability to the user.
However, as human tendency indicates, we could find ourselves abusing this service as a crutch to handle bigger challenges and the eventual fall will be substantial. If employees rely on this program to live paycheck to paycheck or day to day, they will still be ill-prepared for a financial crisis. Not every day is predictable and not every expense is known. I know that from my personal experiences. Unplanned income is not a common event; however, unforeseen expenses are plentiful. If someone uses this program to merely match up daily income with daily expenses, without taking the necessary steps to establish proper savings and plan for the future, we have not provided a true financial wellness service. We have merely condensed the timeline of the stress to daily versus weekly.
If early wage access services are supported by education and credit alternatives when financial challenges arise that cannot be handled by current wages, the early wage access services will not succumb to misuse. I believe early wage access programs can be a healthy part of a robust financial wellness platform that ensure their proper use. The continued educational development of the employee and establishing healthy habits will lead to productivity in both the workplace and at home.
I stand firm on the belief that early wage access can be beneficial, so long as we support employees on their journey to financial wellness by providing appropriate knowledge, education, and resources to ensure they make positive behavioral changes that improve their financial health, with the ultimate goal of NOT having to rely on financial resources like early wage access.
A year ago, I mentioned enterprise organizations like Noodles & Company and Walmart that were offering early wage access services for their employees. Unfortunately, Walmart has come to the harsh realization that offering early wage access as a stand-alone benefit does not help employees or employers in the long run. Walmart had high hopes of increasing retention of their employees by giving them access to their earned wages early. Instead, they found that employees that used the early wage access service have been quitting faster. They hoped that offering this service would help employees budget smarter, save more and stay longer as Walmart associates. Instead, as reported by Bloomberg, “Employees who chose to only use the fast pay option without the other tools, however, left the company faster.”
If your organization is looking to help employees improve their personal financial health AND increase retention of your top employees, a holistic financial wellness benefit that provides educational resources, financial coaching, budgeting tools and access to financial solutions is the proven method to accomplish these goals.
BenefitsPRO published a recent research study conducted by our team that produced some telling data on payroll, employment tenure, financial transactions, program engagement and behavioral modification. When organizations offered a financial wellness program, we found:
- 18.8% increase in retention across salaried and hourly employees
- $1,855 annual turnover cost-savings per employee*
- Nearly $2 million saved annually for every 1,000 employees
There is clear and meaningful correlation between employee engagement in their financial wellness benefit and retention.
FinFit can do the same for your organization!
Get in touch with him – he’d love to talk to you about your company, your employees and how he can help.