What Does Giving Employees Control Over Their Pay Look Like?

For decades, the traditional payroll system has remained largely unchanged. Employees clock in their hours, wait for payday, and repeat the cycle. However, this structure often leaves workers facing financial stress between paydays. Enter Earned Wage Access (EWA), a modern solution that gives employees more control over when they access their pay.

But what exactly is Earned Wage Access? How does it work, and why should employers care?

What is Earned Wage Access?

Earned Wage Access (EWA), also called On-Demand Pay, allows employees to access a portion of their earned wages before their normal payday. Rather than waiting until the end of the week or month, workers can withdraw funds they've already earned as needed, giving them more control over their income.

This approach doesn’t replace traditional payroll systems entirely but supplements them to provide greater flexibility. For instance, an employee who faces an unexpected expense mid-month could withdraw some of their earned wages to cover it, avoiding the fees and interest associated with debt.

Earned Wage Access is gaining traction because it directly addresses the financial struggles faced by many employees across industries. With financial stress being a significant contributor to reduced productivity and wellbeing, providing this flexibility is not just an employee perk; it’s an essential workplace benefit.

How Does Earned Wage Access Work Practically?

The mechanics of Earned Wage Access are designed to be seamless for both employers and employees. Here’s how it typically works:

1. Integration with Payroll Systems

An Earned Wage Access provider integrates directly with your existing workforce or payroll systems. This means you won’t need to overhaul your current processes. Instead, the provider calculates the wages earned by employees in real-time, enabling accurate withdrawals.

2. Employee App Interface

Employees connect to the Earned Wage Access platform through an app. The app displays how much of their earned wages they can withdraw based on hours worked.

For example, if an employee earns £10 per hour and has worked 20 hours since their last payday, they might have £200 available for withdrawal. The system and limits set by the employer ensures they don't overdraw, leaving enough for tax deductions and subsequent payments.

3. On-Demand Access

Using the app, employees can request a portion of their available wages whenever they need it. Typically, withdrawals are capped at a percentage (e.g., 50%-70%) to ensure enough remains for the standard payday.

4. Instant Payment

Once a withdrawal is made, the funds are transferred immediately to their bank account.

5. Employer Reconciliation

Earned Wage Access providers handle all financial logistics, ensuring that any withdrawals align with payroll timelines. On payday, employers run payroll as normal, and the provider will make any of the necessary deductions. This straightforward process ensures minimal disruption to your operations while giving employees more financial flexibility.

What Are the Benefits for Employers of Offering Earned Wage Access?

While Earned Wage Access significantly improves financial wellness for employees, the benefits for employers are just as compelling. Here’s how introducing Earned Wage Access can elevate your business:

1. Retain Top Talent

Retention is another critical factor. When employees feel financially secure, they’re more likely to stay with an organisation. High turnover costs can erode profits, but Earned Wage Access programmes serve as an incentive that reinforces employee loyalty. In fact, Level’s clients have seen up to a 50% reduction in staff turnover resulting from introducing Earned Wage Access.

2. Boost Productivity and Engagement

Financial stress has a detrimental impact on employee mental health and workplace performance. 33% of employees report that their finances have affected their mental health.

By offering Earned Wage Access, you empower employees to take control of their financial wellbeing. When employees aren’t stressed about making ends meet, they can focus fully on their work. This translates into higher productivity, improved engagement, and better overall morale.

3. Reduce Absenteeism

Unexpected expenses and financial emergencies often lead to absenteeism. Employees missing work to address financial challenges can disrupt operations and reduce efficiency. With Earned Wage Access, employees are better equipped to manage unplanned costs, reducing the stressors that lead them to take time off. In fact, by offering Earned Wage Access, employers can benefit from up to a 13% reduction in absenteeism.

4. Support Diversity and Inclusion

Financial struggles are disproportionately felt by workers in lower-income brackets and minority groups. By offering Earned Wage Access, employers demonstrate a commitment to supporting all team members, regardless of their financial circumstances. Earned Wage Access is specifically designed to be inclusive by being available to all employees, regardless of credit history, for the same price.  

5. Zero Impact on Employer Cash Flow

One common misconception is that Earned Wage Access might strain an employer’s cash flow. However, most providers advance the funds to employees, meaning your financial operations remain intact. Employers only reconcile the withdrawals during the regular payroll cycle, ensuring no work for already-busy payroll professionals.

Why Earned Wage Access is the Future of Payroll

Earned Wage Access represents a win-win solution for employees and employers alike. On one side, it provides employees with the flexibility and financial security to handle life’s surprises. On the other side, it equips businesses with a competitive edge in recruitment and retention, productivity, and overall workplace satisfaction.

If you’re looking to learn more about Earned Wage Access or see how it can integrate with your organisation’s payroll system, contact an Earned Wage Access provider today and start empowering your workforce while streamlining operations.