By Erica Brune | Lever1 President
Let’s face it: payroll is archaic. The current process for most W2 employees requires employees to work two weeks, wait an additional week for administrative tasks, and then finally get the money they earned almost a month ago.
But what if payday came a little sooner? Perhaps even instantly?
Forty-three percent of workers spend three or more hours per week thinking about financial stress. With daily access to their earned income, employees can close the gap between paychecks, pay bills on time, and avoid overdraft fees.
Getting paid biweekly can now be a thing of the past. Living a modern life means getting paid with modern technology that allows you to access your pay as you rightfully earn it. Earned wage access enables organizations to deliver instant payment of earned wages to employees with the click of a button. While some banks offer access to ACH funds up to two days prior to payday, the benefit of earned wage access allows employees to make their own decisions and access their funds according to their schedule and necessity.
Picture this: It is Monday morning, and you are on your way to work. Suddenly, you hit a pothole so intense you know it is bad news for your tire. You pull over to assess the damage and are hit with the overwhelming realization that you need a new tire, but it will be pricey. Payday isn’t for another five days, and you do not have enough money in your account to pay for your tire. Your options are either: a) do not fix the tire and miss out on a week of work, or b) use high-priced short-term lending options. Both options are undesirable and leave you with a sinking feeling in your stomach.
However, if you had the option to access the wages you had already earned during the pay period, you would not have to select the lesser of two evils. You would be able to access the exact amount of money you need to replace your tire and carry on with your week.
Earned wage access is not just a benefit for employees but can help employers struggling with recruitment. Studies show that early access to wages results in:
- 72% decrease in turnover
- 36% increase in employee retention
- 86% improved job performance
The future of the labor market continues to be uncertain, but one thing is for sure: employees are looking for what sets companies apart. Employers need to think outside the box regarding recruitment strategies, and what better benefit is there than access to earned wages in real-time.
In addition to enhancing your recruitment strategies, earned wage access can also benefit employers by:
- Retaining top talent
- Eliminating financial pressure on your employees
- Increase workers’ productivity
- Lead the path for a financially literate workforce
- Enjoy all the indirect benefits of a financially happy employee
In the United States, 78% of the population is described as living paycheck-to-paycheck and would rather not wait for their scheduled payday. In the current state of uncertainty, it is understandable for employees to desire consistent cash flow. When workers are not stressed about their financial struggles, they perform better and can focus easily. On-demand pay gives employees peace of mind over their finances and thus creates a healthier work environment.
Although some managers are hesitant to promote on-demand pay, citing poor budgeting skills, its successful implementation at many leading organizations should alleviate those concerns. The ridesharing company Uber has been offering Instant Pay for its drivers for several years. With their program, drivers can cash out their earnings up to five times a day and receive those funds instantly. Many other jobs like bartenders and tipped workers are used to taking home their pay daily.
Today’s job market needs an earned wage access solution like never before. A benefit that ensures your employees receive timely salaries is what sets you apart in a sea of open positions. Studies show that when employees do not have to stress about finances, they can perform better at work. For much of the workforce, the standard two-week payday cycle is not working anymore. It is time to rethink the payroll process and understand how it affects employees’ productivity and well-being.