Providing Financial Services to Employees Is a Win-Win

Today’s global events are forcing employers to rethink their role in supporting their workers, especially in terms of pay.  ADP Research Institute’s Evolution of Pay Research shows workers frequently rely on their employers to offer the guidance and resources needed to help secure their financial futures by aiding in better personal financial decisions. As these expectations become an increasingly important focus of employees, employers are quickly embracing models that allow for greater payment flexibility and personal-finance assistance. The evolution is not just good for the workers — empowering a more financially confident workforce will drive greater overall business outcomes.

Greater Pay Flexibility

Times like this offer a stark example of the need for greater payment flexibility. With restricted business operations, workers need easy access to their earnings. Understandably, they also demand speed that matches the urgency of the moment. Given the diverse demographics of the workforce, it’s up to employers to broaden their pay offerings.

While today’s events underscore the need, this trend is not new. Historically, businesses have adapted to shifts in the way work gets done and how workers want to be paid. The growing freelance workforce and the popularity of flexible schedules are just examples of the many elements contributing to this new outlook. As workers increasingly provide their talents and contributions on demand, they expect on-demand pay, too. With on-demand payments and person-to-person transfers readily available in everyday life, people are beginning to expect those same “instant” pay capabilities from their employers.

Now, more than ever, allowing employees to access pay as it’s been earned, or early-wage access (EWA), offers employers a pathway to meet the critical needs of their employees. In a research paper titled “The Power of the Salary Link,” two authors at Harvard Kennedy School said. charges associated with accessing funds early via an EWA program are typically one-seventh that of a bank overdraft fee, and less than one-fifth the cost associated with a payday loan. This option adds foundational support to the people powering the business while addressing the worker’s immediate financial need. This is, of course, just one tool that can help on a case-by-case basis. The need to help workers future-proof their financial wellness remains.

Better Budget Management Tools

No matter how people are paid, there’s a greater focus than ever on preparing financially for whatever the future brings. Without a doubt, financial wellness has become a significant consideration in the future of play, and one that’s accelerating as businesses navigate current circumstances.

Many people are underprepared for the unexpected. According to recent research from the Federal Reserve, 40 percent of people in the U.S. lack $400 set aside in savings to cover an emergency. Sometimes by choice, though most often not, they are either unbanked or underbanked, which limits their access to financing options that many take for granted, such as ATM access to get cash, the ability to pay bills or shop online, and access to affordable credit. This not only creates friction but also adds expense through overdraft fees, check cashing fees, and payday loans. In many cases, the people most affected cannot afford the added cost. Employers can be part of the solution and help their workers better prepare for emergencies and manage debt.

Today’s technology offers more ways to integrate money management tools into employee benefits. There are a variety of that allow users to set aside a predetermined percentage of their regular paychecks into an emergency or savings account. Some also offer access to financial coaches and budget management assistance, which can help workers down the road in their financial wellness. While banks remain the most trusted sources for money management globally, employers are quickly becoming a conduit for achieving greater financial wellness.

Fully Integrated Financial & Retirement Planning

As we consider financial wellness within the future of pay, we also need to consider its impact on retirement planning. It’s clear that financial stability plays a big role in determining when people can securely retire. A recent Gallup Poll shows the average expected retirement age is now 66 or older, up from 63 a few years ago. The overall trend shows employees’ expectations about retiring before 65 are slipping away, with only 12 percent envisioning retiring before age 60.

Similarly, Gallup shows a decline in those who feel comfortable they have enough saved for retirement. Increasingly, workers say saving for retirement is unaffordable given their current financial circumstances, and it’s putting retirement further out of reach. These facts underscore the need for employers to provide support. There are many resources that employers can integrate into their benefits programs that would offer value to their employees while reducing worker stress and increasing productivity such as financial planning and retirement advice, as well as digital retirement programs.

Looking Ahead to a Brighter Financial Future

Whatever the future brings, the evolving pay landscape offers hope of greater financial confidence. While the journey faces significant challenges, there’s a clear path toward disciplined management and access to convenient and on-demand pay models that seamlessly integrate with how work gets done. As the workforce faces unprecedented change, employers have the power to help their workers build a stronger financial foundation by offering flexible payment options, intuitive budgeting tools, and comprehensive retirement management, all underpinned by financial education. In many ways, current events have accelerated the future of pay we had envisioned. As we move forward, employers will soon become true partners with their workers, and employees and employers alike will find themselves on more stable ground.