In Australia’s rapidly expanding on-demand economy, an increasing number of companies are embracing earned wage access as a valuable benefit to attract and retain their workforce.
This service enables employees to access their earned wages on demand, providing them with financial flexibility instead of waiting for the traditional payday. While the practice has become commonplace in the United States and the United Kingdom, it remains a relatively new concept in Australia, leading to confusion among some companies regarding its functionality and benefits.
The point of this piece? As earned wage access gains momentum in Australia’s on-demand economy, it is essential to separate fact from fiction. By understanding the benefits and functionality of this financial well-being solution, companies can enhance their employee engagement and overall workforce productivity.
Over the past year, Paytime, an Australian earned wage access provider, has witnessed a staggering 600 per cent surge in inquiries for their service. Their offering is now available to renowned companies such as McGrath Estate Agents, Supabarn, and Aspen Pharmacare, among others.
According to Paytime CEO Steven Furman, the ultimate goal is to empower every employee to choose their payday, alleviating the stress of living paycheck to paycheck. Furthermore, companies embracing financial well-being solutions like earned wage access can expect a more productive workforce and lower staff attrition rates.
To dispel misconceptions surrounding earned wage access, Mr Furman addresses the most common myths:
Myth: Earned wage access is a form of debt similar to consumer loans.
Reality: Earned wage access is not a loan. It simply allows individuals to access a portion of their already-earned wages before the official payday. The withdrawal amount is based on the hours they have already worked, and there is no need for repayment.
Myth: Implementing earned wage access creates additional administrative burdens for payroll.
Reality: Earned wage access is a software solution seamlessly integrated with existing payroll and time and attendance systems. Implementation typically takes only 3 to 6 weeks, requiring minimal effort from the company. Payroll calculations and deductions remain unaffected, as employees can only access a portion (usually up to 50 per cent) of their after-tax earnings. The company’s cash flow remains unchanged, as Paytime provides the funds when needed and repays Paytime on payday, much like any other payee in the payroll system.
Myth: Earned wage access is expensive.
Reality: Earned wage access is usually funded by the employee, incurring a cost equivalent to an ATM-style fee. Companies have the option to co-contribute and lower withdrawal fees, subsidising the cost to employees or offering it as an employee benefit. Additionally, a monthly SaaS fee may be charged.
Myth: Employees will deplete their wages before payday.
Reality: There are limits on the amount employees can withdraw before their payday, usually set at up to 50 per cent of after-tax earnings. Companies can have a say in determining this limit, ensuring employees always have wages reserved for payday. In most cases, the timing of expenses and paydays causes the mismatch, which is eliminated through earned wage access.
Myth: Only low-paid workers benefit from earned wage access.
Reality: Earned wage access provides flexibility for individuals of any salary level. Even high-paid c-suite executives have utilised this service to reduce interest on their mortgages by regularly depositing funds into their mortgage offset accounts before payday.
Myth: Earned wage access solely benefits employees, not the company.
Reality: Research indicates that earned wage access improves employee attraction and retention rates. In the face of a cost-of-living crisis, improved access to funds enhances staff morale and productivity.
Paytime’s clients have experienced an average reduction of 26 per cent in staff retention rates. Industries relying on shift workers, such as hospitality, mining, and health/aged care, find it easier to fill roster gaps when employees know they can access their pay immediately after their shifts.
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