Hot Topic - Earned Wage Access
Hot Topic – Earned Wage Access
The question of whether employers should offer employees access to wages as they earn them (“earned wage access” or “pay on demand”) seems to polarise opinions.
Those in favour argue that allowing employees to access their wages as soon as they have worked for them reduces the financial stress and uncertainly caused by the wait for a month end paycheck. With real time wage access, they say, employees can better manage their finances by using earned wages straight away, to reduce debt and increase savings, or to cover an unexpected bill.
They also argue that from an employer’s perspective, reducing an employee’s financial stress and worry allows them to focus on their work and increase productivity. As pay on demand schemes are typically popular with employees, there are further benefits in attracting and retaining a workforce
However, those against earned wage access argue that there is an obligation on employers to protect those less able to manage their finances. And that giving people the opportunity to engage in impulsive spending opens them up to an increased risk of not being able to cover major household bills, which are charged monthly.
Employers may also be negatively impacted by the implementation costs of the technology required to manage real-time wage access. And payroll professionals, already coping with an increase in the prevalence of cross-border remote working and a host of compliance changes, would have yet another challenge to overcome.
According to a 2022 survey of large American companies, only 5% currently offer earned wage access. However, this number is expected to rise through 2023 and European businesses will surely follow their American counterparts as the trend continues. It seems Pay on Demand is here to stay.
On the one hand, it seems fair to allow employees to access their money as soon as it is earned, though it’s equally fair to point out that the employer has to ‘sell’ the worth of that labour to their customers and wait their turn to be paid.
Some employees may be prone to mismanage their finances but if denied access to their earnings may arguably turn to payday lenders – or even loan sharks. Perhaps the real solution lies in an enlightened approach to employer/employee relationships, so that businesses can identify and help vulnerable staff. Without denying the benefits of pay on demand to the majority.