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.
David Kilby has been president of FinFit since it was founded in 2008. He has grown the company from a single idea into the nation’s leading Financial Wellness Benefit platform, servicing over 150,000 clients. Prior to FinFit, David led a multimillion dollar financial holding company where he was inspired to find ways to help employees improve their financial health. He is committed to helping employees succeed today, and prepare to live healthier, more productive, financially stable lives.
Get in touch with him – he’d love to talk to you about your company, your employees and how he can help.
*The per employee annual turnover cost-savings varies by industry and is based on a percentage of annual compensation, modeled at 136% for salaried and 60% for hourly positions. This analysis is based on an equally weighted average of nine research models, proposed by HiringSmart, which include: Society for Human Resource Management, Coca-Cola Retailing Research Council, Cornell University (two separate studies), Alaska State Legislative Update, Hay Group Study, Workforce Magazine – Survey on Employee Turnover, Saratoga’s HR Financial Report, and Bliss & Associates Inc.