Retaining hourly workers can be a problem but never more so than the past few months, when the sheer turnover rate has made it clear that employers need more financial tools to keep workers happy.[1] Higher pay and signing bonuses are nice-to-have perks, but it’s also imperative that employers embrace what hourly workers are saying — they want to have more control over how and when they are paid.
In fact, that’s why 79% of workers indicated they would be willing to switch to an employer who offers earned wage access (EWA).[2]
In a December 2021 bylined article in Bloomberg Law[3], Brian Tate, president of the Innovative Payments Association, explained why the time has come to give workers the control they’re seeking: “Real-life problems demand real-life solutions in real time. EWA solutions empower wage earners by giving them one more tool in their financial toolkit, allowing them access [to] their earnings quickly, efficiently and with dignity.”[4]
In industries with higher turnover, such as restaurants and hospitality, responding to this desire for control could be especially important for recruiting and retention.
How Earned Wage Access Can Give Workers Greater Financial Freedom
A report from the Financial Health Network indicates one in five families has less than two weeks of liquid savings. The study explains: “For the many U.S. workers living paycheck to paycheck, financial distress can occur in the time between earning and accessing wages.”[5] Early access to earned wages can help workers bridge those gaps — helping to give them a way to manage their wages with their own financial needs.
The report noted: “Bills and expenses can be due prior to payday, or unexpected expenses can come up that require immediate payment. This leads many consumers to seek out financial products that will provide them immediate liquidity for short-term needs, overdraw their accounts, defer payments and risk incurring late fees.”[6]
Most importantly, the demand for wage solutions that balance the real-world needs of today’s workforce is growing. Industry data indicates 55.8 million earned wage access payments totaling $9.5 billion were facilitated in 2020.[7] Instead of employees having to consider utilizing options like a credit card or a loan to cover short-term payment needs, earned wage access solutions can provide employees another option to cover unexpected expenses between paydays.
Helping workers gain more financial control over when and how they are paid can also have an impact on turnover and lost earnings. In fact, 150 hours of productivity are lost each year by employees under financial distress.[8] Giving them better financial stability with greater control over their earnings shifts the tide — and can increase the chance they’ll be able to stay at their job.
Industry data suggests when an employee feels their financial needs are met, they are more likely to stay at the job. In fact, BenefitsPRO published a recent research study that revealed organizations that offered a financial wellness program saw an 18.8% increase in retention across salaried and hourly employees.[9]
Financial instability also plays into mental and physical health. Empowering hourly employees is about putting them in better financial control with financial decisions that may allow them to do things like pay bills on time and meet their financial demands on their schedule.
The financial well-being of employees is often dependent on how they can manage their personal finances. Better control over their lives, including how and when they are paid, is a trend that will continue to play out in the workforce dynamics. Earned wage access is part of the equation. But this payroll benefit shouldn’t be offered alone; it should be part of a larger financial wellness package that can help employees take more control over their financial lives.
Embracing earned wage access can likely present a win-win scenario for workers and their employees. It can give employees more control over how and when they get paid — and many earned wage access solutions get employers up and running quickly, enabling them to gain an edge in this competitive hiring market. For companies looking to address hiring and retention issues head on, opening up early access to earned wages may be the next step.
About the Author: Andrew Garner is Senior Vice President and General Manager of Business Partnerships at Netspend, and is responsible for the company’s innovative suite of payment solutions for employers including earned wage access, paycard, digital tips, disbursement and incentive product sets including all sales and business development efforts, implementation, account management, operations and strategy. Garner is a graduate of the University of Kentucky with a Bachelor of Business Administration in Finance.
1. The New York Times, “More quit jobs than ever, but most turnover is in low-wage work,” January 2022, https://www.nytimes.com/2022/01/04/business/economy/job-openings-coronavirus.html
2. Visa Earned Wage Access Preferences Study, 2019 https://usa.visa.com/dam/VCOM/global/run-your-business/documents/visa-earned-wage-access-insights-report.pdf
3. Bloomberg Law, “It’s Time to Give Workers Easier Access to Their Pay”, December 2021 https://news.bloomberglaw.com/daily-labor-report/its-time-to-give-workers-easier-access-to-their-pay
4. Bloomberg Law, “It’s Time to Give Workers Easier Access to Their Pay”, December 2021 https://news.bloomberglaw.com/daily-labor-report/its-time-to-give-workers-easier-access-to-their-pay
5. Financial Health Network, “Earned Wage Access and Direct-to-Consumer Advance Usage Trends”, June 2021 https://finhealthnetwork.org/research/earned-wage-access-and-direct-to-consumer-advance-usage-trends/
6. Financial Health Network, “Earned Wage Access and Direct-to-Consumer Advance Usage Trends”, June 2021 https://finhealthnetwork.org/research/earned-wage-access-and-direct-to-consumer-advance-usage-trends/
7. Financial Health Network, “Earned Wage Access and Direct-to-Consumer Advance Usage Trends”, June 2021 https://finhealthnetwork.org/research/earned-wage-access-and-direct-to-consumer-advance-usage-trends/
8. Chicago Business Journal, April 2019, “Employees’ Money Worries Drain Employers’ Bottom Line” https://www.bizjournals.com/chicago/news/2019/04/15/employees-money-worries-drain-employers-bottom.html
9. BenefitsPro, “Struggling to retain top employees? A benefits refresh that includes financial wellness could be key”, April 2021 https://www.benefitspro.com/2021/04/01/struggling-to-retain-top-employees-a-benefits-refresh-that-includes-financial-wellness-could-be-key/
