Inflation and other factors are leading some employers to include earned wage access — which lets workers get a portion of their paycheck ahead of their usual pay cycle — as part of their recruitment.
In particular, companies that compete against gig economy employers such as Uber are finding that they can win over potential hires by promising earlier access to their paychecks. One example is OTG Management, which operates quick-service and full-service restaurants as well as retail stores at airports across the U.S. and at Toronto's Pearson International airport. It works with its payroll provider, Ceridian, to offer employees the Dayforce Wallet earned-wage-access card.
"When we recruit at our career fairs, we mention Dayforce Wallet, and we tell new staff during their orientation about the service," said Alan House, executive vice president of human resources at New York-based OTG. "We get a lot of excited individuals when they hear about the Dayforce Wallet card."
Dayforce Wallet is linked to Ceridian's Dayforce payroll and human resources system. It is free to employers and employees, generating revenue for Ceridian from interchange on card transactions.
OTG rolled out Dayforce Wallet in the U.S. in January 2021 and in Canada in July 2021. The wallet grew quickly in popularity and is now used by around 50% of OTG workers in the U.S. and 30% of Canadian employees, House said. "In the U.S., usage has increased 131% since last August, and there has been 100% growth in Canada since July 2021," he said.
Inflation is one factor that led to this rise in adoption, House said. Dayforce Wallet is popular among OTG's hourly-paid staff who don't have a bank account and get paid with paper checks. Thirty percent of its staff fall into this category, and the majority of them opted into using Dayforce Wallet.
"Inflation has led to an upswing in Dayforce Wallet enrollment and activity. Our workers are hourly paid and they make a good wage, but inflation is taking a bite out of everyone's wallet," House said.
EWA is becoming increasingly an employee expectation, said Matt Spoke, CEO of Toronto-based Moves Financial, which provides bank accounts for U.S. gig economy workers in partnership with the $2.67 billion-asset Blue Ridge Bank in Charlottesville, Virginia.
"As people move to gig work and freelance work, they are becoming less and less patient about waiting to be paid," he said. "Gig work is becoming increasingly normalized, as it expands beyond rideshare gigs to other verticals. People are more familiar with the idea of having multiple sources of income instead of having one job."
Offering employees early access to their wages to meet specific financial needs helps them avoid higher-cost financial services such as payday loans and high-interest overdrafts or credit card loans. According to the Consumer Financial Protection Bureau, a typical U.S.
As Dayforce Wallet users aren't charged fees, the product isn't subject to consumer credit legislation, according to a November 2020 advisory opinion by the CFPB, which said that employer-based EWA programs don't qualify as loans or credit as long as the "employee makes no payment, voluntary or otherwise, to access EWA funds."
However, in 2021 EWA industry lobbyists and some legislators in New Jersey used the CFPB's advisory opinion as justification for
An April 2022 survey of 3,033 U.S. and Canadian adults by Ceridian, which is based in Toronto and Minneapolis, found that 54% of respondents had trouble covering expenses between pay periods over the previous six months, with inflation and high expenses cited as some of the biggest factors. This has led large employers to implement on-demand pay to help alleviate employee financial stress, Ceridian said in a press release.
While OTG pays salaries on a weekly basis, the wallet gives employees much quicker access to their wages, allowing them to receive up to 50% of their daily earnings each day. Typical users make occasional withdrawals once a week to meet a financial need, House said.
According to Seth Ross, Ceridian's general manager of wallet and consumer services, Dayforce Wallet is most popular in the retail, manufacturing, health care and hospitality sectors.
"These are areas that have struggled to attract new workers since the reopening of the economy post-pandemic, especially in front-line roles," he said. "Also, when employers are hit by potentially rising wage costs, they need to find ways to provide benefits to staff that don't necessarily cost them more in wages. EWA is a valuable staff benefit that costs nothing to offer, so it's compelling."
At the start of the pandemic, the rationale for employers to implement EWA was to help workers get through any disruptions to their cash flow.
"People were hurting, so
As of June 30, 2022, 1,200 of Ceridian's 5,728 users on its Dayforce payroll platform had signed up for Dayforce Wallet, and 650 companies were live with the wallet, according to an earnings statement. This compared to 600 companies that had signed up for Dayforce Wallet as of June 20, 2021, of which 200 were live with the wallet.
The cumulative registration for Dayforce Wallet among eligible employees increased from 36% in the first quarter of 2022 to 40% in the second quarter, with active users utilizing their Wallet card for payments about 25 times a month.
According to Ross, companies that offer Dayforce Wallet fill open positions 15% more quickly than companies not offering Dayforce Wallet. Also, employees using Dayforce Wallet have a 21% lower 90-day attrition rate than other employees.
"The service is having a meaningful impact on employers' ability to attract and retain talent," Ross said.
Earned-wage-access products provide "stickiness" for retaining and attracting employees, said Aaron Bright, business development team leader at Galileo Financial Technologies in Salt Lake City, which offers prepaid cards used for EWA services by DailyPay and Clair in the U.S. "I think EWA will become very important and will be table stakes for lower-income earners, for example in fast food restaurants and the gig economy," Bright said.
The research firm Aite-Novarica estimates that $9.5 billion was withdrawn through EWA accounts in the U.S. in 2020. Although the Canadian EWA market is less developed than its U.S. counterpart, Canadian employers and workers have expressed interest in EWA, said Francisco Alvarez-Evangelista, an advisor in Aite-Novarica's retail banking and payments practice.
Research by the Canadian payments infrastructure operator Payments Canada found that as of May 2021, Canadians participating in short-term contracts or freelance work represented 13% of Canadian adults and 37% of Canadian businesses employed gig workers.
"A third of Canadians spend their entire paycheck or more in a pay period," Alvarez-Evangelista said. "Giving lower- and middle-income workers the ability to choose how often they get paid will be a powerful employee retention tool."
