The payroll community is largely divided on the topic of earned wage access (EWA) and on demand pay.
While many firms have adopted and realized the positive impacts from modern digital pay methods and financial wellness solutions, the reality is that many more are still holding out – viewing these innovations as simple fads that will eventually go away. I believe this is rooted in two core perception issues.
First, most practitioners feel that adopting on demand pay solutions translates to, yet another tool payroll must test, deploy, and support in their long list of critical responsibilities. Further, many employers believe their payroll operating costs will go up as a result.
My research and analysis of many of the leading on demand pay solutions shows that these solutions offer an incredibly low impact activation process, meaning payroll must do very little to launch and operate them. Further, the cost models for on demand pay is very low and often the ROI realized offsets any cost of adoption. Interestingly, the ROI realized generally has little impact on payroll itself (although it inherently drives up electronic payments), rather it is a “benefit” that commonly leads to measurable improvements in employee engagement, retention, referrals, and candidate interest.
Second, the marketing of on demand pay solutions has centered almost squarely on the use case for supporting employees living paycheck to paycheck and gaps in accessing funds for life events. While these solutions address those use cases and elevate financial acumen, the reality is digital payment solutions offer many more advantages than bridging access to wages ahead of payday. For example, firms are using it to enable same day payments for terminations or leveraging it to quickly move money to employees as a contingency (think COVID lockdown or recent ice storms in Texas).
Not to mention, digital payments are becoming standard in our personal lives and employees expect employers to provide the flexibility to shape their work life experience, which includes a choice for the modality in which they are paid (amongst many flexibility drivers).