Founder of GajiGesaone of Southeast Asia’s largest access to earning wage companies.
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The past two years have completely changed the way business is done. Rapid lifestyle changes, rising costs of living and the residual impact of the Covid-19 pandemic mean that businesses and workers are struggling to adapt and gain a foothold. Companies that try to improve their bottom line without taking care of their employees will be doomed in the long run.
To increase employee well-being, companies are increasingly seeing the benefits of offering their employees early access to their earned wages so they can make ends meet. And even though it is still in its early stages, access to earned wages has enormous potential and solves problems that traditional payroll systems cannot.
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How traditional payroll is failing employees
The earliest records of what can be considered payroll come from Mesopotamia. Around 3100-3000 BCE, someone recorded the amount of beer given to workers as part of their daily ration on a clay tablet. Fast forward to the 20th century, where taxes, government regulation, and automation have created a modern system of paychecks. But what has remained constant since those early withdrawals is that employees are paid at the end of a fixed cycle, usually one month.
However, the gap between making money and receiving that income can be a source of financial stress for employees. And these pressures have been exacerbated by the pandemic and rising inflation, driving desperation among workers living paycheck to paycheck and facing financial emergencies. This scenario often traps these earners in the never-ending cycle of high-interest loans and lifetime debt.
Access to earned wages is revolutionizing payroll
In OECD countries approx $1 trillion accrues on employer payroll accounts on a given day. If these funds can be made available to employees before their contractual payday, it can make a huge difference to their financial well-being.
Earned Wage Access (EWA) gives employees full control and access to what they have earned. EWA is reinventing what a payday is by turning every day into a potential payday. Since employees can only access money they have already accrued, there is no risk of accumulating debt through this system. Instead, employees have the freedom to better manage their finances.
Over the past ten years, EWA has become very valuable in industries with large segments of workers. For example, franchises like Target, Walmart and McDonald’s they all have EWA programs that go a long way in helping employees avoid overdrafts or predatory payday loans. EWA can have an even deeper impact in emerging markets like Southeast Asia, where financial literacy is low and low large parts of the population are underemployed.
4 reasons why employers should consider offering EWA
Offering EWA to employees has clear benefits for both employers and employees. And while it may seem counterintuitive to pay employees before the stipulated payday, EWA creates goodwill among the workforce and saves money for the employer in the long run, making it a smart business decision.
1. Makes the company more attractive.
In recent years, we have experienced high staff turnover and turnover. In a competitive job market, companies are forced to find ways to make them more attractive to potential employees in order to retain them. On an organizational level, offering EWA can help employers differentiate themselves from the competition, attracting and retaining dedicated employees and creating goodwill among their workforce.
2. Improves employee productivity and satisfaction.
Financial stress and uncertainty have a negative impact on productivity and effectiveness. According to Harvard Business Review, improving the employee experience can increase an organization’s turnover by 50%. Offering a flexible system of how employees are paid can increase their engagement and satisfaction, which translates directly into lower costs and a better bottom line for the organization.
3. Provides greater financial stability for employees.
Having on-demand access to their wages increases employees’ financial stability by ensuring consistent cash flow. In particular, EWA programs can reduce financial stress for lower-income workers who are ineligible for bank loans through simple measures such as control over the timing of bill payments. This payroll approach helps employees cope with financial challenges and promotes financial inclusion and security.
4. Creates a positive impact on a macroeconomic level.
It is important to note that financial inclusion is advisable not only at the level of the individual employee, but also at the macro level. It can lead to more spending on goods and services, fueling a favorable economic cycle in which more consumption creates more jobs and higher incomes. In the bigger picture, this will lead to better business outcomes for entrepreneurs, meaning that EWA can help unlock this potential and accelerate economic growth.
EWA startups increased $1.18 billion in funding in 2021 and $108 million in the first three months of 2022. The concept is clearly gaining traction and is emerging as a valuable product for employee financial well-being. By increasing employee financial resilience and freedom, EWA can usher in a new era for payroll that is flexible, progressive and supports the changing lifestyles of the post-pandemic workforce.
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