Why it’s time for India to embrace the Earned Wage Access solution

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All over the world, employee satisfaction has long been linked to greater productivity in the workplace and long-term business success. In the context of Covid-19, financial well-being is increasingly recognized as one of the most important components of employee happiness, necessary to manage the financial issues that have emerged among the workforce in the world.

Closer to home, financial strains remained a common challenge for the Indian workforce. A KPMG study carried out in 2020 reported that in the midst of the pandemic, 30% of organizations reported a downward revision to fixed compensation, reflecting challenges with traditional organization-wide compensation systems. More recently, India reported a sharp increase in household debt, which rose from 32.5% in FY20 to 37.3% in FY21, due to the impact negative financial impact of the Covid-19 pandemic..

For decades, there has been little innovation in the way employees are paid. Most of the workforce is still paid monthly, leaving many people financially vulnerable and unable to prepare for the future. The paycheck-to-paycheck-to-paycheck life has also been known to expose employees to short-term payday loans and credit facilities, creating a cycle of debt. Employers can break this negative loop and have a positive impact not only on employees but also on their businesses by embracing the unique ‘Access to earned wages’ Solution.

What is “access to earned wages”?

Earned Wage Access (EWA), also known as pay-on-demand, is a fairly evolved concept globally. Introduced in the early 2010s, it essentially allows employees to have regular access to their earned income, and not only when they are receiving the monthly salary. It offers financial freedom through easy access to a portion of their accrued salary, before payday, with the remaining or unused portion being paid as part of the regular payroll cycle.

EWA marks a significant change in the way employees are paid for their work. Employees can access compensation on a daily basis, in the same way that they acquire rights to paid vacation. Instead of receiving their pay at pre-set intervals – usually at the end of the month or at the end of the week – they are free to access and withdraw their pay for the number of days worked – at any time in the month.

What are the benefits of the model for employees?

Globally, EWA is recognized as a powerful and adaptable financial product that helps employees track, spend, save and budget their earned pay in real time, without incurring complicated interest charges. Earned Wage Access, when fully integrated and operational, offers benefits that can be widely disseminated throughout the organization.

  • Instant financial liquidity: We live in a world where instant gratification is sought after in virtually every aspect of life. We are also living in uncertain times when many find themselves in a situation of increasing financial stress and need immediate access to their wages to meet their financial responsibilities. Earned Wage Access is designed to meet both of these needs and that is why it is gaining popularity in many parts of the world.
  • Avoid predatory loans, strengthen financial stability: In the context of Covid-19, it is crucial to offer employees greater financial liquidity that can help them cope with unforeseen expenses, better manage their money and plan for a more stable financial situation. With EWA, employees can acquire emergency cash in the event of an unexpected demand or obligation, without accumulating additional debt, thanks to quick access to their pay when needed.
  • Right to pay: Employees have control over when they get paid, allowing them to align their pay dates with their personal financial obligations.
  • Simplicity and convenience: Thanks to the simplicity of the app, employees can perform the entire payroll process themselves, from their own devices, without the intervention of the payroll team.

Why is this an ideal solution for employers to adopt in the context of Covid-19?

In a competitive job market, Earned Wage Access is a big selling advantage. Around the world, the adoption of EWA has helped employers differentiate employee benefits, making them more attractive destinations for talent.

Research shows 84% ​​of employees worry about their finances at work. Earned Wage Access, which allows hourly workers instant gratification by accessing their earned wages between pay cycles, is known to have a positive effect on talent, reduce financial stress and promote the overall financial well-being of employees. Research also shows that the possibility of accessing the wages earned before the payday can improve employee engagement, productivity, overall retention and attrition rates.

For example, employees who feel in control of their income are less concerned about their finances, more motivated to come to work and more productive when they are there. Plus, when an employee can see the financial consequences of their efforts, they’re less likely to skip a day. It not only helps to generate an employer trust and loyalty at work but in the longer term, this translates into an improvement in the financial performance of the organization armed with a financially savvy workforce.

Since (most) EWA platforms use their own capital, EWA can help you reduce costs for employers. They don’t have to worry about their working capital, in fact they can keep it by positioning it as an alternative to salary advances, as the responsibility falls entirely on the workforce and teaches them to be responsible for their finances. The tracking aspect offered by most EWA applications is a tremendous boost in developing financial discipline.

Why is EWA crucial for holistic financial well-being in the workplace?

Broadening the horizon of financial well-being beyond simple insurance and social security benefits, it’s time for new-age employers to bring the aspect of access to earned wages into the mix. EWA is a revolutionary approach to improving payroll, a fantastic opportunity to be progressive and forward thinking, and a flexible way to support changing work habits and employee lifestyles in the post-pandemic era.



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Disclaimer

The opinions expressed above are those of the author.



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