Although wages have been increasing, many employees are still struggling to make ends meet. Traditional payday loans can be expensive and often leave people in a cycle of debt.
This is why Earned Wage Access (EWA) has become more popular for employers and employees alike. EWA provides employees with access to their earned wages prior to payday. While this is great news to most people, this on its own isn’t enough to help employees become more money savvy.
It’s important to understand the five biggest benefits of offering EWA in 2023.
By offering EWA in 2023, you can benefit from improved financial well-being and increased employee engagement among your workforce. You can also reduce costs associated with traditional payday loans, boost transparency into employee spending habits, and increase productivity due to less financial stress.
What Is Earned Wage Access (EWA)?
EWA is a revolutionary new way of managing employee payroll. This system allows employees to access their wages on-demand as soon as they have earned them, rather than waiting until the traditional payday. It works the same way as an advance or disbursement on wages, enabling employees to access their pay whenever they need it most. It eliminates the need for traditional payday loans and helps reduce financial stress by giving employees more control over when they receive their paychecks.
How Does EWA Work?
EWA all employers to deposit funds directly into their employees’ accounts regardless of when those wages are due. The employer simply sets up a pre-defined schedule for payments and deposits money into an account created by the employee for this purpose. As soon as money is deposited in this account, the employee can make use of it according to their own needs and desires.
Benefits of Offering EWA in 2023
EWA is highly beneficial to companies that know how to use it correctly. Here’s a list of the common benefits of EWA:
1. Improved Financial Well-Being
Employees who have access to their wages in advance of payday can better manage their finances and avoid extra fees associated with traditional payday loans. This can help reduce stress related to financial issues, allowing employees to focus more on their work and less on worrying about money.
2. Increased Employee Engagement
By offering EWA, employers show their employees that they trust them to manage their finances responsibly. This can lead to increased engagement and loyalty from employees, as well as improved morale.
3. Reduced Costs Associated with Traditional Payday Loans
By eliminating the need for traditional payday loans, businesses can save money on costly fees associated with these loans. This can help businesses save money in the long run and increase their bottom line.
4. Boost Transparency into Employee Spending Habits
By allowing employees to access their wages on demand, employers can gain more insight into how employees are spending their wages. This can help them better manage financial resources and make better decisions about employee compensation and benefits.
5. Increased Productivity
By reducing financial stress, offering EWA can increase employee productivity. Employees who are worried about their finances are more likely to be distracted and less productive at work. Having access to their wages when they need it most can help employees stay focused and get more done in the workplace.
Disadvantages of EWA
Like with any new system, there are some potential drawbacks to offering EWA. Companies should be aware of the following before implementing this technology:
1. A Lack of Regulation
Currently, there is no single governing body to regulate EWA in the US or other countries. This means that employers need to be extra diligent when choosing a provider to work with and ensure that their chosen provider is compliant with local laws.
2. Financial Mismanagement
The on-demand access to wages can lead to some employees mismanaging their finances. Employers need to ensure that they provide resources and education to help employees understand the importance of wise financial management and budgeting.
3. System Errors
As with any computer system, there is always a risk of errors or glitches that could result in delays in payment or other issues. Employers should make sure they are working with a reliable EWA provider who has a robust security system in place to reduce the risk of such occurrences.
Earned Wage Access is becoming increasingly popular with employers and employees alike. The ability to access wages prior to payday can reduce financial stress, increase employee engagement, and boost productivity in the workplace. Companies should consider offering EWA if they want to reap the benefits of this technology in 2023. However, employers also need to be aware of potential drawbacks and ensure they are working with a reliable provider who follows all applicable laws and regulations. With the right approach, EWA can be a powerful tool for improving financial well-being and increasing employee engagement in the workplace.