In the post-pandemic hiring landscape, employers are looking for new ways to entice potential employees into joining their companies.
One emerging trend is with earned wage access. Earned wage access is gaining traction as a modern payroll benefit because it’s shown to provide quicker job satisfaction once an employee is onboarded. But what is it?
We sat down with Brian Slowik, co-founder of rapid! Paycard, to talk all about earned wage access and what it means for recruiting in the future. Listen here: https://compliance.cicplus.com/podcast/earned-wage-access/
Read on to learn more.
What is earned wage access?
Earned wage access (EWA), also known as on-demand pay and early wage access, refers to the act of giving employees access to wages they’ve already earned but have not yet been paid. It may sound simple, but it goes a long way with potential candidates.
Part of or all of an employee’s accrued wages for the next pay period can be transferred to their account early. This “loan” is essentially deducted from the next paycheck, and is paid without interest of any kind.
It changes the way payroll is handled by making it more flexible, allowing employees to have their wages when they need them, rather than waiting for payday. This can be appealing to candidates who have abnormal schedules when it comes to bills, or it could give them peace of mind knowing they have access to their pay should a financial emergency arise.
EWA started to hit the market in the 2010s, mostly due to a declining number of Americans who had access to credit and traditional banking. After EWA grew in popularity, it began to replace payday lenders, allowing working people to avoid the interest that came with payday loans.
Why companies have been adopting EWA as an employee benefit
The post-pandemic job market has quickly turned into a candidate market.
Recruiters have been using strategies, like work-life balance and modern payroll benefits, to differentiate their companies and entice new employees in what is a highly competitive job market. Not only is the goal of these strategies to get employees onboard, but also retain them and keep them satisfied.
Companies have come to realize that longer pay cycles can be difficult for employees. Going two weeks or even a month may not align with when bills are due or the irregularity of living costs. EWA gives employees the power to access their money when they need it, for whatever reason.
The future of EWA and modern payroll benefits
Though we’ve seen much experimentation with EWA in the past few years, its growth has only just begun. Along with this growth, regulation has started to come into play as well. The Consumer Financial Protection Bureau (CFPB) has already been looking at ways of regulating practices like EWA and benefits similar to it, and companies are working with the CFPB to create EWA models that are within compliance.
Industry veterans, like Brian Slowik, believe EWA will become the standard way to pay people. It’s already becoming standard practice with many gig workers, such as those who work for rideshare or food delivery companies.
Beyond EWA, businesses are turning to paycards as part of their payroll benefits in an effort to reduce the exchange of paper, as well as paper waste. This is due in part to the pandemic itself, as it’s made people more conscious of passing around physical currency. Overall, paycards are a convenient way to do banking both for the employer and the employee.
Payroll benefit challenges for employers
For employers, the challenges that come with payroll benefits is an ongoing battle. It’s a matter of striking a balance between staying current with the most current and appealing benefits while making sure their company remains compliant.
Beyond getting their company to 100% direct deposit, perhaps the most notable challenge in the current benefit landscape is adapting all parts of the payroll process to be digital. The convenience of mobile banking sets the perfect environment for a concept like EWA, but the reality is that not all parts of the process have caught up yet. Some parts are still paper-centric, specifically around any task that still involves government regulation.
Ultimately, employers want to utilize the most robust benefits package they can to bring in strong talent for their companies, and EWA might be the next evolution in doing just that.
In an effort to make the entire payroll process digital, some companies may need help with their pay statements. CIC Plus can help overcome that challenge with our custom pay statement solution, allowing teams to create multiple types of wage statements without limitations, while meeting all state and company requirements.