Why businesses are giving employees the gift of earned wage access

This holiday season, retailers and restaurants may be struggling to hire seasonal workers, unable to compete on wages as inflation puts a squeeze on businesses' budgets as much as individuals' wallets. But even if employers can't change how much they can pay their workers, they still have an opportunity to attract them with earned wage access. 

Whether seasonal workers are looking for part-time work or long-term employees are looking to pick up extra shifts, being able to pay them instantly will appeal to a workforce that's hustling to make ends meet through the holidays while simultaneously preparing for a possible recession. 

"We know that employees are more likely to take jobs where they can get paid on the same day," says Tal Clark, CEO of on-demand payment provider Instant Financial. "Many retailers are still staffing for the holidays until February or so, and as they compete to hire, they have a much better chance of attracting good employees if they're making pay available every day." 

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Rather than waiting the standard two weeks to see the financial impact of completed work shifts, earned wage access programs partner with companies' payroll systems to give workers instant access to the money they earned on any given shift. In most cases, it is paired with an app or a platform, such as Instant Financial, where they can opt to direct deposit any portion of their earnings from a shift. In some offerings, earned wages can be automatically loaded onto a prepaid debit card. 

"Employees would feel better about the opportunity to work and the long hours — which sometimes you have to do during the holiday seasons — if they know they have access to that pay," he says. "They can go buy gifts and cover the needs they have for their families right away." 

For businesses and employees alike, the gift of earned wage access will likely keep giving long after the holiday season is over. A recent survey conducted by Instant Financial found that 87% of employees are more likely to take a job where they have access to their pay each day. 

Employers are paying attention: Over the course of the last year, the amount of instant payroll transactions increased from $1.52 million in the third quarter of  2021 to more than $6.08 million in the third quarter of 2022, according to a recent assessment from payment company The Clearing House.

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"Traditional biweekly pay schedules are outdated and have the potential to create financial stress for younger employees, particularly for those employed in the service, retail or gig industries," says Jim Colassano, SVP of product development and strategy at The Clearing House. "On-demand pay and traditional payroll providers can leverage [earned wage access] to give workers the ability to access the money they have already earned and help with unexpected expenses without having to dip into savings or rely on credit or going into debt." 

As employers across all industries begin to consider what kind of benefits they want to add before the year's end to boost retention and recruiting in 2023, changing their outlook on compensation has long-term benefits. HR departments should reach out to banking and payroll partners for their available products and services, according to Colassano, or look into third-party options and vendors. 

"On-demand pay will no longer be only for the gig economy or service jobs," Colassano predicts. "Eventually individuals of all income levels will expect on-demand wage access to help with unexpected payments, emergencies and even investment opportunities."