Study Proves: Earned Wage Access (EWA) Enhances Long-Term Employee Retention

A significant number of employees regularly experience financial constraints that impact their quality of life and job satisfaction. The good news is that there is a solution that can help address employee challenges: Earned Wage Access (EWA). A study conducted by Harvard Business School demonstrates that EWA enhances long-term employee retention and reduces financial stress.

In this blog post, you will learn about Earned Wage Access solutions and how they can reduce financial stress among your employees. The study also reveals that EWA improves employees' financial well-being and significantly boosts employee retention.

Financial Constraints and "The Big Quit"

Financial constraints burden many employees and have a negative impact on various aspects of their lives. The effects are part of a notable trend: an increasing number of people quitting their jobs. This phenomenon, known as "The Big Quit," has led employers to pay closer attention to improving the well-being of their employees. Earned Wage Access represents a promising solution in this regard. It significantly reduces financial pressure on employees, either as a complement or alternative to salary increases.

How Does Earned Wage Access Work and Why is it Popular?

Earned Wage Access allows employees to access a portion of their earned wages before the regular payday. This innovative solution offers short-term financial relief during economically challenging times. It eliminates the potential drawbacks of traditional short-term loans, such as high interest rates and long repayment obligations.

Study Reveals: Earned Wage Access Enhances Employee Retention

The impressive adoption rate speaks for itself: According to the study, U.S. employees accessed Earned Wage Access approximately 56 million times in 2020, amounting to a total of $9.5 billion. This is triple the usage compared to 2017. This development raises the question of whether Earned Wage Access truly improves employee well-being and has a significant impact on employee retention.

The Mechanisms behind the Success of Earned Wage Access

To answer these questions, a study was conducted in 2022 by Harvard Business School. It examined the usage patterns of Earned Wage Access within a company and analyzed its influence on employee retention. The researchers had access to extensive data from a leading provider in Mexico, including information on service usage, employee demographics, and employment history.

The Benefits of Earned Wage Access for Employees and Employers

The study's findings are highly enlightening: First, many employees utilize Earned Wage Access shortly after its introduction. Certain preferences emerge: The service is particularly popular among male, younger, and long-term employees. However, usage volume remains consistent regardless of qualification level or salary. Furthermore, Earned Wage Access usage concentrates towards the end of the pay cycle. With more frequent usage, the disbursed amount increases over time, and withdrawals occur increasingly earlier in the pay cycle.

Regarding employee retention, the study demonstrates that employees utilizing Earned Wage Access have a significantly lower likelihood of leaving the company. The effect of EWA on employee retention is particularly pronounced among employees with lower qualifications.

The Significance of Earned Wage Access for Financial Stability and Employee Retention

The study identifies two main mechanisms that explain the positive benefits of Earned Wage Access: First, EWA serves as a form of financial security, mitigating short-term financial burdens that affect employees' daily work life. Second, Earned Wage Access enables employees to access their income earlier than the usual payday, thereby significantly increasing utility and flexibility and promoting employees' financial stability.

paygood: Contributing to Employees' Financial Well-being

paygood was created with the goal of contributing to the financial well-being of all employees and generating social value. This innovative app empowers employers to reduce financial stress among their employees, making it easier for them to overcome financial gaps. Employees can securely and discreetly request a portion of their earned wages at any time through the app. The disbursed amount will then be automatically deducted from their next payroll. Such "Earned Wage Access (EWA)" offerings are already available in many countries within and outside of Europe. Additionally, paygood provides information on financial stability and supports employees in budgeting and financial planning. This makes paygood unique and delivers a social benefit.

About HR Improvement

HR Improvement GmbH is an innovative HR tech company founded by experienced HR experts in early 2023. Its goal is to help companies make their HR departments more effective and promote the financial stability of their employees. To achieve this, HR Improvement has developed paygood, the first "Earned Wage Access (EWA)" app for the German-speaking market. This novel service solution contributes to the financial well-being of all employees and generates social value. With paygood, employees have access to a portion of their earned wages at any time. HR Improvement helps employees reduce financial and mental burdens, thereby enhancing their well-being and commitment.

For more information about paygood and HR Improvement, visit https://paygood.app or https://hr-improvement.de.

You can find the comprehensive Harvard Business School study here.