Earned wage access, also known as on-demand pay, is being leveraged by your peers as a key recruitment and retention tool for workers who may be strapped for cash right now because of the high prices of gas, energy bills and groceries.
In a Zoom interview, Scot Parnell, CFO of DailyPay, estimated that 37% of companies with 500 or more employees are either using earned wage access to some degree or are at least considering it.
But is it a good fit for your company?
Potential benefits of adopting earned wage access include:
- slashing company payroll costs involved with cutting paychecks and/or direct deposit
- saving employees money on overdraft and ATM fees, payroll lending and credit card interest and late fees, and
- reducing employee absenteeism caused by financial stress, such as childcare or transportation costs.
Also, consider that many younger workers prefer not to rely on traditional banks and have digital-driven preferences, including mobile money management tools. In fact, research by ADP found that 91% of Millennials and 82% of Gen Z workers said it’s important for their employer to offer earned wage access.
But that’s not all! Over half (57%) of Gen X and Baby Boomer workers polled by ADP said it’s important to them as well.
Coupling earned wage access with pay cards
A poll of attendees during the Premier Learning Solutions online workshop “On-Demand Pay: Updates & Processes Employers Need to Know,” found:
- 12% of employers offer earned wage access
- 44% offer employee pay via pay cards, which work like a debit card, and
- 11% offer both.
Also during the workshop, Tricia Richardson, CPP, SPHR, SHRM-SCP, said that if you’re thinking of making earned wage access even more convenient by transferring the funds directly to employee pay cards, there are six important considerations before taking that step:
- Is your payroll system current enough to support pay card payroll?
- Can your payroll system do all the legally-required deductions, including wage garnishment, on an off-pay-cycle basis before putting the funds on the pay card?
- Can your potential pay card vendor show that it’s compliant with all federal, state and local laws?
- Does the vendor you’re considering offer the option to personalize the pay card with your company branding and employee name?
- Are employees able to use the cards if their employment ends and money is still on the card?
- Does using the pay cards come with ATM or other fees? If ATM fees are charged, can a list of ATMs that can be used without a fee be provided?