Across the board, employee retention rates have taken a nosedive. With workers jumping ship left and right across industries, businesses are looking for more innovative ways to keep employees happy. Companies are exploring everything from rethinking employee benefits strategies to changing their pay frequency. One of the newer strategies for employee retention is Earned Wage Access or EWA.
According to Forbes.com, providing EWA to employees can increase retention rates by 20-40%, making EWA a selling point for recruiting top talent into your organization.
If you’re interested in understanding how EWA can fit into your plans to improve your payroll services and operations, this article outlines four simple steps you can take to implement EWA in your organization.
4 Steps to Providing Earned Wage Access
Let’s begin by defining EWA. You can find the definition easily just by breaking down the term itself. Many employers fear that EWA is a loan or an advance on future earnings, but when you choose the right EWA plan, that is not the case. If you are working with a reputable company and using the right EWA plan, you’ll likely find that Earned Wage Access practices strive to provide employees with the option to access wages they have already made before payday. Offering EWA will not replace your regular processes for running payroll but would need to work in conjunction with them.
Next, we can discuss why you might want to offer EWA to your employees. EWA can enable employees to cover surprise expenses or bills without needing to take out a loan. Simply put, it’s a benefit that can indicate to employees that you care about their financial well-being, making them more likely to stay with your organization.
If you are interested in partnering with a payroll company passionate about researching and pursuing the most innovative HR solutions possible, consider scheduling a call with ConnectPay today. Next, let’s dive into the four steps you need to take to implement an EWA solution for your organization.
Step 1: Select a Provider for your EWA Solution
The first thing you need to do when exploring an EWA solution is find a provider with whom to partner. EWA services are generally provided to employees through a mobile application, allowing workers to track their earned wages daily and access a portion of them before payday if needed.
When you are looking for a provider to partner with, make sure you ask key questions, such as:
- What is the cost of accessing funds? Is there a free option for employees?
- Can users without bank accounts access their funds?
- What is your compliance framework?
Step 2: Decide Who Provides the Funds for Advance Payments
Once you have selected your provider, you will need to work out more details and logistics regarding your EWA solution. The most critical piece of the puzzle to work out is which party will be providing the funds to employees who access wages before payday. If the provider will be fronting the money, what does your business need to do to reimburse them?
Step 3: Decide on a Method of Repayment
After you’ve worked out the front-end process of providing employee access to earned wages, you need to determine how this will impact your regular payroll schedule. Since not every employee will choose to access their earned wages each pay period, you will still need to process payroll as usual. But there is still one important question to consider.
How will you manage payroll for employees who did access their wages early?
The easiest way is to go green with paperless payroll. In other words, you can require your employees to receive their paychecks through direct deposit or paycards, making it easier to deduct early-accessed wages from their payments. When you bring paper checks into the mix, the whole process only becomes more complex.
Step 4: Outline Rules for Employees
Lastly, you need to lay out the rules for employees regarding EWA. How often can they access their wages? Daily, or only once or twice per pay period? Would they be permitted to access the entirety of their earnings early, or is there a limit to the funds they can access mid-pay period?
Setting clear expectations and rules for employees is essential to providing EWA.
Should you Provide Earned Wage Access?
Is EWA something you should explore for your organization? Even though it can be relatively simple to implement, that doesn’t necessarily mean it’s the right solution for your organization or industry.
When you consider whether or not to offer this solution, you can examine what competitors in your industry are offering their employees in terms of EWA or survey your current employees to see if there is interest in EWA. These practices will give you a better idea of whether or not this is a solution worth pursuing for your organization.
For more payroll-related tips and tricks, download our checklist, The 6 Pillars of Payroll, today!