Earned wage access (EWA) is gaining popularity among businesses in practically every industry. EWA, the financial wellness benefit that allows workers to access earned wages instantly, has helped employees address short-term financial needs or emergencies that arise before payday. Since the payment is money that's already earned, there's no interest to repay or extensive forms to fill out.

While earned wage access is enticing to workers, employers who offer EWA are seeing benefits as well. By offering financial flexibility with EWA, businesses have been able to reduce key areas costing HR departments:

Reduce Employee Turnover

EWA has a significant effect on the cost of employee turnover by providing the incentive employees need to stay. Giving employees control over their earnings is a way to offer financial stability and peace of mind. While some people argue that instant pay will promote irresponsibility, results of those using the program already show the opposite effect, with only about 20 percent of employees accessing available pay per month.

While the majority of Americans live paycheck to paycheck, hourly wage earners often face changing schedules and unpredictable paychecks. EWA can mean the difference in paying a monthly bill, taking care of an emergency, or even putting gas in the tank to get to work. The ability to meet these needs gives employees the financial stability they need to feel secure in their current position instead of seeking other employment.

Eliminate Requests for Payday Advances

Since earned wage access comes from a third party provider, employers and HR staff are cut out of the equation. Instead of complicated requirements, interest costs, and potential compliance issues, employees can access the advance directly from an app on their smartphones. This removes the stigma from asking for an advance and employees can get the funds they need to address their financial issue. Depending on the frequency and the number of employees seeking payday advances, HR savings could be substantial.

Help Managing Employee Shifts and Hours

Earned wage access provides incentives to employees in more ways than one. The ability to collect wages immediately can entice workers to volunteer for additional shifts. The result is fewer absences and staff that are willing to work to earn the money they need to fill income gaps.
In addition to instant pay, EWA apps often have other helpful features. Our platform allows employees with the ability to see available shifts from their smartphones. Since schedules are often unpredictable, workers who have the ability to see their projected income and choose to pick up additional shifts at their convenience are getting closer to overall financial stability. These empowered workers provide a ripple effect that frees up HR time usually spent scheduling employees.

Improve Employee Recruitment

Earned wage access provides many great benefits over time, but recruitment often means concentrating on the immediate needs of your new employees. Luckily, EWA is a great perk for new hires. Beginning a new job often comes with the dreaded delayed first check. This can be a big problem for employees who have been out of work or are experiencing other financial distress. Hourly wage earners often need cash sooner rather than later when changing jobs. For this reason, EWA can literally seem like a lifeline for workers seeking a new job.

The turnover rate, annually for hourly staff is a staggering 49 percent. The cost of replacing one hourly worker is well documented to exceed $2,500! The resources spent on hiring and training employees, only for them to leave and your hiring managers to have to start the hiring process all over again is costly. Here are 3 ways to reduce turnover among your hourly workers:

1. Offer Instant Access to Earned Wages
   Many hourly workers live paycheck-to-paycheck. When an unexpected expense is presented, such as an automotive repair or healthcare fee. This can start a spiral of additional expenses such as late fees and perhaps high interest payday loans. In these situations, waiting two weeks to receive earned wages can exacerbate the problem. The inability to have money when they need it, means they are constantly on the lookout for better opportunities. What is the solution? Offer your hourly employees instant access to their earned wages.
2. Professional Training Opportunities
   Typically, hourly employees have a minimal amount of higher education but aspire to obtain professional certifications and degrees. The most common roadblock in their way is the inability to afford it out-of-pocket and the unwillingness to take out loans and go into debt. Offer employees ways to develop professionally and advance their careers. Offering professional training opportunities is a great way to become a highly sought-after employee increasing the quality of candidates that you attract. There is a myriad of ways your company can go about achieving this. You can offer employees the opportunity to go back to school, tuition paid. You can set requirements such as if the program is not completed, the employee must pay back all of the tuition. Stipulations, such as requiring the employee to work for your company for a certain amount of time after the completion of the degree will ensure you get a return on your investment. Other options include sending hourly employees to industry seminars, workshops, and certification programs. You can even implement ways for these employees to advance within the company. Employees will be much more satisfied when they see opportunity for personal growth and professional advancement within your company.
3. Implement a Savings Program
   Since many hourly employees are living paycheck-to-paycheck they do not have adequate savings put back in the event of an emergency. However, they understand the importance and desperately want too. The importance of having a safety net cannot be overstated. You never know when a family member might have a medical emergency or a vehicle may break down. These are both situations that require immediate financial attention. The implementation of a savings plan for hourly employees will increase employee retention and help to reduce employee turnover rate. 
   
   

Reducing Turnover Rate of Hourly Employees
The bottom line is that it is in the best interest of companies to implement strategies to increase the retention of quality, hourly employees. Unfortunately, this is also the employment sector that sees the highest turnover rates. The secret to employee retention is increasing the financial wellness of your employees. Companies can choose one or more strategies to increase this sense of wellness for their employees.

Your employees are working for a paycheck that they'll receive next week or next month. However, there are times when employees need extra funds as soon as possible. Today there are opportunities such as UBER and Lyft, where your hourly employees receive compensation the same day vs waiting for a paycheck from you. This can be detrimental to both your company and your employee as you are likely willing to pay them more than they would earn as a UBER driver at a time when you desperately need the support of your experienced employees.

Early wage access (EWA) allows your employees to get a portion of their paycheck instantly to pay for emergencies or other immediate expenses. Since this is income they've already earned, there's no worry about interest rates or transfer fees. The ability to access wages early could be the incentive your employees need to pull a few extra hours during the holiday season.

How Early Wage Access Works

Early wage access (EWA) is a relatively new concept that provides employers with a simple way to offer their workers more control over the wages they earn. 78% of American workers are living paycheck to paycheck. That means if an emergency (or even common necessities like school clothes) crops up, these workers are forced to take on debt to take care of the issue before payday. These financial worries add up to stress for workers. A recent study revealed that 48% of workers are stressed about simply covering basic living expenses. This stress has a major impact on employees' overall health and daily performance.

Financial stress seeps into the workplace in the following ways:

• Increased stress in more than half of employees leading to lower morale
• Poor health leading to increased tardiness and absences
• Lower productivity due to an inability to focus
  
  

When employers partner with a third party provider to offer early wage access, employees can get a portion of the money they've already earned instead of waiting until payday to take care of the financial issues making them stressed. Workers can access the EWA service through an app and instantly make a deposit without worrying about transfer fees or taking on additional debts.

As an employer, you can set limits on the amount that can be withdrawn and take advantage of other benefits to help employees gain financial stability. The set-up process is easy and employees can sign up and navigate the whole process using a smartphone. This increased freedom finally allows employees to access income they've earned without having to ask for permission or an advance. By empowering workers with financial control, engagement increases and employees have the incentive to pick up additional shifts when they need to earn a little extra money.

Financial stress is a common occurrence, and can lead to real business costs. Both of those statements have been proven, but provide little in the way of a solution. ROI, after all, is about making that investment to ensure you can save your company money and build a better workplace environment.

With that in mind, let's focus on the clear-cut benefit of improving your employees' financial health.

The first conclusion is obvious. If financial stress puts a financial and productivity strain on your business, it's imperative for that business to minimize that stress in order to avoid losing some of these resources. As long as the time and effort spent minimizing your employees' financial stress is less than the potential loss quoted in the previous section, the ROI of the entire effort should be positive.

The Financial Impact of Increasing Employee Financial Wellness

The impact to business was analyzed in a 2016 case study https://www.financialfinesse.com/wp-content/uploads/2019/05/2016-ROI-Special-Report.pdf observing Fortune 100 companies and their financial wellness efforts over a five-year span between 2009 and 2014. The report scaled the quality of wellness programs on a 10-point scale. Even improving from a score of 4 to a score of 5 yielded impressive results:

• Savings of up to $4,347,275 in absenteeism.
• Savings of up to $433,007 in garnishments
• Savings of up to $682,034 in flexible spending and health benefits
  
  

Naturally, increasing the score further makes these savings even more significant. Another study, https://www.napa-net.org/news-info/daily-news/financial-wellness%E2%80%99-roi-could-save-large-employers-millions using the same wellness scale, found total savings for employers of 100,000 employees when going from 4 to 5 to be $65 million, rising to an astonishing $129 million when scores increased from 4 to 6.

Of course, the numbers won't be as large in total for smaller employers. Still, nothing in these studies suggests that the general trend, significant financial savings resulting from increased emphasis on financial wellness, is true for all businesses across industries, regardless of size.

Where Do You Start?
The ROI of a strategic effort to improve your employees' financial health is significant. It ranges from clear-cut financial benefits to more subtle cultural and recruitment advantages. Of course, you can only reach these goals if you make the right choices and offer the right kinds of benefits. Some of these benefit programs might include:

• Educational programs designed to help employees manage their finances focused around common topics like retirement and health care expenses.
• Easy access to a consultant and professional contact for more personal questions that might require a more in-depth look at the situation.
• Clearly outlined guidelines and policies for anything related to your employees' finances, such as an outline of what exactly would result in a bonus or wage increase.
• A streamlined process of accessing wages as easily as possible and prevent your employees from incurring debt in the meantime.
  
  

Especially earned wage access tends to be a great tool to counteract some of the financial stress your employees are feeling. Enabling your workforce to access funds when they need them reduces the need for credit cards or other new debt, ultimately leading to many of the benefits discussed above.


It's important to start somewhere. Just as financial health and wellness is a priority for the modern workforce, it should be for employers. When the cost and intangible benefits are this significant, a conscious effort to reduce stress and maximize employee happiness can pay off in more ways than one.

Employee Benefit News (EBN) reports that it costs employers 33% of a worker's annual salary to hire a replacement if that worker leaves. In dollar figures, the replacement cost is $15,000 per person for an employee earning a median salary of $45,000 a year, according to the Work Institute’s 2017 Retention Report. The study of 34,000 respondents concluded that 75% of the causes of employee turnover are preventable.

Do your own math on what it cost to hire an employee, lost efficiency for training and managing work schedules, administrative time dealing with hiring and departures… now consider how much turnover you actually have. For many companies with significant hourly workers, turnover is as much as 100%.

If you could give you employees tools that would make their employment just a bit more sticky and reduce that turnover, that would save your company significant money!