Forbes calls Earned Wage Access (EWA) "a prized benefit" and "the hottest new fintech app." Why is this new employee benefit so appealing? Simply put, employees value it and it costs employers virtually nothing. Consider these stats: 

• 40 percent of Americans don't have enough cash to cover a $400 emergency. 
• 70 percent of workers say they are in financial stress, and more than 50 percent say it affects their work. 
• 80 percent of workers live paycheck to paycheck.

Cash flow is an issue for millions of Americans and even more so for hourly employees, resulting in high interest payday loans, late charges, and overdraft fees. EWA enables employees to access money they earned and avoid the costly consequences of other options. As a result, companies utilizing an EWA service have seen decreased turnover. It's not surprising that a growing number of companies, including Walmart, Taco Bell, and McDonald’s, have joined the EWA trend. 

What is EWA?

Employers using EWA give employees access to their earned wages before the normal payroll cycle. By partnering with third-party providers, workers take advantage of the service through an easy-to-use application that can be downloaded to their phones. Many EWA providers have a small transaction or membership fee which can either be paid by the employer or employee. Branch offers EWA for free to both employers and employees. Employers typically establish rules on how often workers can withdraw and how much. In addition to access to funds, apps also provide financial guidance, overdraft warnings, and sometimes discounts at local stores. Overall, the goal is to help employees gain control over their cash flow, and avoid other pricier options, such as payday loans. It's useful in times when their rent or car payment is due just a couple days before their actual paycheck would be distributed. 

EWA provides real-time, instant access, 24 hours a day, 365 days a year. Why is EWA a beneficial option for both employers and employees? Here are three reasons why EWA is a win-win.  

1. Help Employees Manage Their Finances

According to Employee Benefits News, "EWA is one way employers are helping workers better manage their expenses and avoid short- and long-term borrowing." Instead of using a credit card, taking out a payday loan or incurring late fees, employees can access the cash they need to pay bills on time. 

As previously noted, 80 percent of Americans are living paycheck to paycheck, without the funds for unexpected emergencies. If they need to see a doctor or pay for home repairs, EWA can be an invaluable tool. It's not just about emergencies, though. Imagine a single mother who comes up short while buying groceries. Access to her EWA app will help her get what her family needs without risking overdraft fees. 

EWA apps helps employees manage their finances even when they’re not withdrawing. For example, Branch provides a wage tracker so that workers can estimate how much they’ve earned so far during that pay period. Employees want more data about their earnings. An EWA app can give them an overview of their earnings and expenses to help them plan for the future and avoid financial gaps. 

2. Decrease Turnover

Employee benefits are consistently at the top of the list when it comes to reasons why employees quit. EWA gives employers a competitive edge in a tight labor market. Giving employees access to their earned wages when they want creates a major shift in their lifestyle. They now have the ability to pay bills on time with the push of a button. When this huge advantage is attributed to a benefit the employer has provided, the worker stays around. 

However, it's not just about pleasing employees that are in a temporary financial bind. It's about meeting expectations, and Millennial and Generation Z workers are used to a world where they can access goods and services instantly. By 2020, Millennials will make up half of the American workforce and 75 percent around the world. In order to retain this emerging group, employees must provide appealing benefits. Inc. magazine identifies two of this generation's biggest perks are flexibility and tech in the workplace, both of which EWA contributes to.

Instant access isn't new to the marketplace. Rideshare companies, such as Lyft and Uber, have used a model of letting employees cash out daily from the start. From home health care providers to auto repair chains to major retailers, instant EWA has become a standard benefit across the country.  The simple truth is, if you have benefits your employees are actively using, they'll think twice before moving to a company that doesn't provide that benefit. EWA creates loyalty and a strong bond between employer and employee. 

3. Create a More Productive Environment

The strong bond mentioned above develops an engaged workforce. Engagement is the most critical factor in employee productivity. The Society for Human Resource Management (SHRM) defines engagement as "the strength of the mental and emotional connection employees feel toward their places of work." Engaged employees are enthusiastic and committed to the mission of their company. 

More than 50 percent say financial stress affects their work. When employees are worried about paying their rent on time, they are distracted, less engaged and less productive. Removing that added stress creates a more productive environment.

Why Not Just Change Your Payment Schedule?

If payroll frequency is the issue, why not simply change to a more frequent pay schedule? First, changing your payment schedule does not get you all the other added benefits. Consider these points.

• The emerging Millennial generation demands instant gratification. They want their earnings at their fingertips. Moving to a weekly pay schedule will not satisfy this need.
• Knowledge is power. Simply shifting the payment schedule will not give employees the real-time earnings updates they crave.
• A more frequent payment schedule still does not provide instant, real-time access, 24 hours a day, 365 days per year.  
• Instead of streamlining your process, changing the pay schedule actually adds more processing time, creating more work for your internal staff and making their jobs less productive. If you currently pay bi-weekly, switching to a weekly schedule will essentially double the payroll workload. 
• If you use a payroll service, you will also likely increase the costs for their services.

In addition to losing out on EWA benefits, changing your payroll schedule can also have legal implications. There are federal and state payroll laws that companies must comply with. For example, the federal government does require companies to keep a reliable and consistent pay frequency. You must pick a schedule and stick with it. In fact, if you do change, the Feds require that you "have a legitimate reason" and that the "change is permanent." Keeping your pay schedule and adding an EWA service provides the perfect solution for giving employees access to funds more frequently while avoiding the complications of altering your payroll frequency. 

Should You Offer EWA?

Ask these questions:

• Are you offering a financial wellness benefit that addresses employees’ short-term needs?
• Will EWA reduce the number of requests for advances?
• Will fewer employees need to borrow against their 401(k) plans?
• Will it allow us to compete against other employers, especially those offering daily payouts?
• Could management benefit from the features of the EWA app?

Employers are the main means of gaining financial security for employees. They often rely on employers to provide disability coverage, life insurance and retirement plans, all methods of making us feel more secure. An EWA service is another asset that employers can use to add even more financial stability. Think of EWA as more than just a payment tool. It's a way of helping employees get their financial lives in order. Branch is an EWA app that is enabling employers to be their worker's first access to financial services. By offering this free voluntary benefit, companies help employees break the cycle of financial hardship and debt. In turn, the company sees a dramatic increase in employee performance.

Request a demo to learn more about how our services can help your company realize those goals.