Blue Monday is renowned for being one of the most depressing days of the year. The weather is miserable, and consumers face the harsh reality that what they’ve borrowed must be repaid, and with interest.
As debt charities anticipate a surge in calls from worried borrowers, it’s hard to not feel that this issue could be easily avoided. In fact, many would argue that the problem can be reduced through simple measures.
UNLEASH caught up with experts in earned wage access (EWA) to find out if companies have a role to play and whether giving employees access to funds earned earlier could help avoid panicked calls to debt charities.
Why employers should consider EWA?
Bergstrom noted: “About 54% of Americans live paycheck to paycheck. Even employees who don’t report officially living paycheck to paycheck feel frequently feel pressured to make ends meet.
“EWA gives workers the ability to access money they’ve earned before their scheduled payday which helps alleviate some of the financial burdens they may be under. This approach can help calm employee nerves, attract talent and build loyal associates.”
Openwage, a software company that specializes in finance and EWA, shared a similar sentiment.
Head of product Martin Slaney told UNLEASH: “Allowing employees to access their pay if, and when, they need it via EWA makes them less likely to experience financial stress, a trigger that can lead to distracted and unproductive employees.”
According to Slaney, it has “been proven that happy employees perform better.”
“Offering EWA can be a great talent magnet too. In the UK and US, it’s really starting to gain pace. So breaking new ground by implementing EWA gives companies a clear advantage when it comes to hiring the right people.”
Given that many employers are continuing to struggle to retain and attract staff amidst the ‘Great Resignation‘, EWA could have a positive impact.
Evidently, there are benefits to flexible payments, and given that very few parts of consumer life now follows a monthly schedule it is understandable that there is a push for this kind of change. This is particularly the case at this time of year when people are still reeling from the overspending that is associated with Christmas.
However, some decision-makers may be concerned about the time, effort, and stresses this shift might have on already stretched HR and payroll teams.
How to implement EWA effectively
Of course, different EWA software requires varying times to implement.
Pierce noted that “the process to implement Immediate EWA is very simple: it takes two, 45-minute virtual meetings with a company’s payroll team over a four-week period, followed by a go-live announcement to your team.”
He added: “The entire process is very straightforward and is designed to create minimal impact to existing workflows.”
Similarly, Slaney said: “Openwage can be rolled out to employees in just a few days at no cost to the business. We provide the funds to employees, so there’s no impact on company cash flow.
“Giving employees instant access to their pay won’t become a payroll headache either, because employers don’t need to make any changes to the way they run payroll.”
Looking more broadly, Paycor’s Bergstrom discusses ensuring the successful adoption of an EWA product. “There are several EWA providers; look for one that is approved by the Consumer Finance Protection Bureau, has a high net promoter score, and integrates with your HR platform’s mobile app.
“Once you’ve chosen the right provider, it’s critical to over-communicate the benefits of an EWA program to employees and help them understand how it’s different than what they are used to and how to take advantage of it.”
This is crucial because “change can always be scary for employees, especially where pay is concerned.” Therefore, over-communication can “pave the way for employee adoption.”
Is Blue Monday a call to action?
It is clear that EWA has real benefits for employees and is not an added burden for HR teams. So the only question that remains is whether Blue Monday should be a catalyst for change?
“Blue Monday’ serves as a reminder that millions of people live day-to-day under significant financial strain. Research from PwC recently found that 42% of full-time US employees find it difficult to meet household expenses on time each month.
“In addition to the toll it takes on workers and their families, employee financial stress also negatively impacts business, as it leads to absenteeism, decreased productivity and increased turnover.
“One remedy to combat these heightened levels of stress is to give workers access to their earned wages ahead of the traditional payday.”
Pierce added that Blue Monday also highlights the mental stresses that a lack of access to earned wages can have.
“Notable psychology associations indicate that financial stress is the top stressor of most people around the world, and as Blue Monday puts a spotlight on depression and gloom – in many cases predicated by financial shortcomings; EWA provides a financial safety net to help ease some of these mental health struggles.”
However, others believe there is a much deeper issue in the way wages are distributed.
Steve Tonks, senior vice president EMEA at employee experience platform WorkForce Software told UNLEASH: “Blue Monday is a white-collar issue – woe is me; the Christmas credit card bill has arrived and I’ve overindulged over the festive period.
“An earned wage access (EWA) payroll scheme, however, is particularly important for supporting low-income earners by providing them with access to wages before payday.
“With a third of low-income households struggling to pay bills every month, EWA ensures that workers can better manage their cash flow if a sudden bill arrives and avoid high-interest payday loans. This is vital in lunar pay cycles, where there could be up to eight weeks elapsed time between when hours were worked and when payment is received.
“EWA shouldn’t be a ‘nice-to-have’ during the long month of January. Instead, it should be viewed as an ongoing CSR goal for organizations, supported by education and advice on money management.”
A focus on education is supported by Nick Gallimore, the director of talent transformation of the software and services company Advanced, who noted that EWA isn’t a fix for all financial woes: “There are reasons for employers to be cautious – and they [employers] absolutely should approach EWA with care.
“When used appropriately, EWA can support financial wellbeing in the very short-term, but in reality, financial wellbeing requires an individual to have a long-term financial plan in place.
“If employees are regularly using EWA schemes in order to make ends meet in the short term, this might indicate that they are not in a position to be creating financial wellness in the long run. Therefore, the ultimate aim of financial wellness programs should be to educate employees, and to find ways of supporting employees in their longer-term financial planning and health.”
Whether you see Blue Monday as a reason to start making a change to the way staff are paid, it is evident that EWA is an important issue in a greater discussion of finance that needs addressing sooner rather than later.
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