Welcome to the Bringing the Human Back to Human Resources
podcast. I'm Tracy Chernoff, and I've
spent my entire professional career in HR Each week, we'll
explore the delicate balance between people and business with
the aim to reconnect the two and create meaningful outcomes.
Listen in as I share my own experiences, challenge the
status quo, and chat with guests from various industries about
our mission to bring the human back to human Resources.
Hi everyone, welcome back to the podcast.
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This week I want to talk about earned wage access, which is a
topic I believe I've spoken about on the podcast before.
Earned wage access is basically the philosophy and the ability
for employees to access their wages as they've earned them
ahead of or before or really at any time ahead of their regular
scheduled payday, or regularly scheduled payday I should say.
So let's say someone gets paid usually bi weekly and they have
a week left until that payday, but they really need to access
the wages that they've already worked and earned.
So let's say it's a Wednesday and they've worked Monday and
Tuesday and they are really interested in accessing those
wages. That is essentially what earned
wage access is where then they would that that employee in
particular would be able to access, let's say the five hours
per day that they had already worked.
This is a, a topic that I wanted to talk about a, because it's
something that I really believe can improve greatly the lives of
hourly employees especially, but also just employee engagement
overall. And it's something that has been
definitely more popular in recent years.
And one of the reasons why also I wanted to talk about it this
week is because recently I want to say in the last two days, I
think yes. So this was, Oh no, sorry, a
little bit longer than that. Last week, I should say.
On May 21st specifically, South Carolina became the 5th state to
enact a law regulating earned wage access providers, But it
doesn't subject them to lending laws, which we're going to get
into. But because this is a recent,
you know, kind of news article that is relevant to those of us
in HR but also those of us who are employees, I thought it
would be an interesting topic. Before I get into some of the
stuff that I just mentioned, like lending laws and things
like that, I just kind of want to reiterate what earned wage
access is. It is effectively the
opportunity where employers are able to provide employees access
to their earned wages. This again, as I kind of said in
the beginning or just just a little a little while ago, I
believe that this is something that hourly employees especially
can benefit greatly from. Hourly employees are more often
than not working a minimum wage or maybe slightly above.
If you think about hourly employees and the perspective of
exempt versus non exempt, there are salary requirements to be
exempt. So let's just say non exempt
employees there for those who are earning an income on an
hourly basis, while there may be people who are well above the
minimum wage based on their salaries, it's highly possible
that they also are working paycheck to paycheck in order to
make ends meet and or working a second job or even a third job.
A term that I recently learned about is this term over
employed. And I've learned this term
because technically I'm over employed because I have my
podcast and my own business while also working full time for
a tech company and actually a tech company that that provides
earned wage access to employees that use our product.
So, you know, it's this idea of over employed, you know, we can
come back to to that and as a separate podcast episode
probably. But anyway, I don't want to
digress too much. Earned wage access is really to
me again super beneficial for those who are working on an
hourly basis. When we think about the common
issues that hourly employees are faced with, it tends to be
income driven issues, whether we're talking about the amount
that they earn and when we think about minimum wage and things
like that, that's one element there.
And then the second is that because of their salary or I
should say their, their hourly income, it is highly possible as
I mentioned that they are interested or potentially part
of generating other income streams for themselves.
In my experience, having worked in retail, let's take Target as
an example where roughly 80% of store employees are hourly.
We I found, I shall, I'll speak from my own experience, I found
that those employees more often than not were, were working
second or third jobs. And again, we're quote, UN quote
over employed. And these individuals were
always looking for more hours in order to gain a higher income or
or earn a higher income. And I can only imagine, I don't
know what Target does today. It's been a while since I worked
there, but I can only imagine what would be if those employees
had access to their earned wages ahead of paid periods, ahead of
pay dates. And while I remember Target did
do advances for employees, it wasn't, you know, it, it's not
the same as what I believe earned wage access is.
So when we kind of break this down a little bit further,
earned wage access, when we think about what it means for an
employee, not necessarily what it is, but what it means for an
employee. It means that that employee then
potentially doesn't necessarily need to work a second job.
If they can get more hours at their existing job and have
access to more hours, potentially be able to receive
the money that they've already earned ahead of time.
They're not in this position where they're necessarily, I
should say, where they're actively looking for pay when
they need it. Now, of course, if a business is
not able to give an employee more hours than they are still
kind of in that same position, but earned wage access does
provide that flexibility for employees, for people, for human
beings who need flexibility in their pay.
Now with that background, I do want to read you a little bit
from this article from HR Dive, which goes into this new law in
South Carolina. So again, a a new law was signed
in for May, on May 21st requiring Earned Wage access
providers operating in the state to register annually with the
Department of Consumer Affairs. And as part of the registration,
the state will require the Earned Wage Access or EWA
providers list fees to be imposed on the employee or
employer in providing the services and include at least
one option by which a user can receive earned wage access
services at no cost. Now, one of the things that I
want to continue with here is this idea of a loan being
provided, or I should say the lending laws as part of the
laws. Because sometimes when earned
wage access is part of the conversation, people
automatically kind of jump to, well, is this a loan?
Is this in advance that is then either paid back or you know
what, what does that look like? How does that work?
So the article continues. While the new law imposes other
limitations on such providers, the big win for the industry is
that the law specifically says Ewa.
Again, earned wage access services won't be considered
loans and their providers won't be treated like lenders.
Which for me, and I'll go into some of the logistics behind
this too, but for me, I think this is a really important part
of the law. Earned wage access to me is not
a loan lender relationship because effectively an employee
who is participating in an earned wage access program or
has access to earned wage access, they are they have
already earned the hours that they're quote UN quote cashing
in on. So to me that doesn't feel like
a loan. Obviously when you compare it to
something like a 401K and you take out from a 401K, you can
make the same argument. Well, I made those contributions
and so taking it out is a loan, but it's different because
earned wage access is specifically on income.
Whereas if you look at something like a four O 1K or another, you
know, maybe I should say specifically with a four O 1K
loan or a different type of loan, it's not income driven.
Those are either based on specific personal or company
contributions or state provided benefits in depending on or I
should say bank provided benefits depending on the type
of loan. You know, you could also look at
like the federal government loans for student loans.
It's different, right? Like that to me, and I'm not an
expert in finance, but to me the relationship is different
because if we again, take a different example with a, a
federal student loan, you've not necessarily yet earned your
degree and yet you're receiving loans from the federal
government in order to do so, in order to be able to pay for the
services that you're rendering, which is essentially the
education you receive. And then when either as you
complete your degree or when you finish your degree, you then owe
money to the loan provider, to the lender.
In this case, in my example, the federal government.
So with earned wage access to me the relationship is different
because an employee is in a an employee employer relationship
with the employer providing earned wage access and the
employee has already worked the hours, they've already provided
the service that they are contracted or obviously not
contracted in at will states, but that they are hired to
provide that service has been provided, right.
So essentially the way I see it is almost as a payment.
And so when we think about earned wage access relative to
pay, pay dates and regularly scheduled pay dates, I see it as
well. If an employee is typically paid
on this Friday and they are looking to access their wages
the Wednesday prior, it's not a loan, it's them effectively
advancing their paycheck. And there shouldn't be any
penalty or fee or anything like that because they've already
earned those wages. Now of course there are
companies that provide earned wage access opportunities who do
charge a fee. But to me that should that fee
should be incurred by the employer.
Because again, as I said in the beginning, I believe this drives
employee engagement. When an hourly employee who's
earning $16.00 an hour works 25 hours a week and they have a
leak in their home and they need to pay for a repair person to
come out and fix it that day. But they are working paycheck to
paycheck and they don't have the means until payday.
Their employer is driving for them a very serious level of
engagement because that employee now can take out wages that
they've already earned and be able to pay for a repair person
to fix their leak again with this example, rather than having
to wait. So the the type of engagement
that it it drives is pretty personal.
This is not, you know, liking the environment that we work in.
And that's where the engagement comes from.
This is like a deeply personal level of engagement.
So and, and maybe it's hard for some of us to relate to some of
these examples because maybe we've never had to live in this
type of experience or we haven't had these experiences or we
don't know someone with these experiences.
But I can tell you from my own personal experience that it
really makes a huge difference when someone has total
flexibility in how they live and the money that they earn and the
way that they can have flexibility just around
accessing their money that they've earned.
So that's the first thing. The second thing is, in my
opinion and from what I've seen, again from my own experience,
especially in retail, when employees have access to their
wages ahead of or in part with their regularly scheduled pay
dates, they are much more interested in working the shifts
that they're scheduled. And it's not to say that people
who are working on an hourly basis aren't interested in
working their shifts. That's not what I'm saying.
What I mean is that very specifically reduces attendance
issues because they can see physically how much money they
could be earning for that shift. And I can tell you, at least
with the company that I work for, Legion Technologies, we
provide our clients earned wage access and you can literally see
how much your shift is going to earn you.
And when you know, I think for some of you have been here for a
while, you know that I was actually on when I was still in
retail, we use the technology that Legion Technologies offer.
So I was technically a a client before I was an employee.
So it's an interesting story for another time if you haven't
listened to that episode, I think from probably 2 1/2 years
ago at this point. But anyway, what I saw in my
experience is that effectively employees are really less likely
to skip out on their shifts because they see how it's going
to impact them. If someone's going to earn or
has the ability to earn $200 for their shift, there's an
opportunity cost there. If they call out or if they're
late, they see the the the actual monetary impact by
attending or by not attending their shift, and so on.
In the same breath, when someone sees a shift that is then
available for them. When a company offers earned
wage access, they are likely to work more or they're likely to
take on more shifts, which only benefits them more greatly if
they are an individual who is actively seeking higher income,
higher income level, or an increased access to wage, or I
should say an increased access to income.
So, you know, again, this kind of comes back to this idea
around hourly employees who are more often than not working more
than one job in order to make ends meet.
When you have this perfect storm where it's earned wage access,
shift flexibility and the ability for hourly employees
especially to take shifts from others or swap shifts and things
like that. And I could talk about that for
a whole other episode too, because it's another thing that
I think is really, really helpful for the hourly
population. And you then also have, you
know, an employer that sees these things as driving
engagement. It is the perfect storm for
allowing. I realize storm sounds kind of
negative, but I mean it in a positive way that then you have
this experience where employees are really experiencing a type
of flexibility that enables them not only at work, but also in
their personal lives. And flexibility, you know, it's,
it's a term that I've used especially for myself as a
salaried employee, as a person who works remotely, obviously as
a new mom, flexibility is really important to me.
Hourly employees make up over 60% of the US working
population. So if we're only thinking of
40%, meaning the salaried employees, when it comes to
flexibility, then we're missing the majority, We're missing what
their needs are. And flexibility is not something
that is just in the context of remote work versus hybrid work
versus in person work. Flexibility is so much more than
that. And so to me, earned wage access
is one of the pillars of flexibility, especially for
hourly employees, because it's income based.
And when people have flexibility with their income and they have
a say so over their earned wages, I to me, the sky is the
limit for the opportunities that they feel that they have with a
business. It again, the engagement is huge
there. I think because a company that
offers earned wage access versus a company that doesn't, to me, I
think there's a, there's a huge recruitment factor there and
employees are just generally happier when they feel more in
control of their finances and of their income.
And certainly there's, you know, I'm sure that there's an
argument to be made saying, Oh, well, you know, and I know
sometimes people say this in the same breath, Oh, well, earned
wage access isn't driving a financially sound experience for
employees. But that's not true.
Because whether so let's say even more specifically, if
people think that it's counterintuitive to or
contradictory to saving, it's just simply not true.
Because let's take an hourly employee who earns $16.00 an
hour and they work 25 hours a week.
Whether you have earned wage access or not, saving might not
be the first thing that they're able to do.
So, you know, businesses have to really think about what is
their, what is their audience? Who is their audience?
And what is it that their audience really needs?
Someone who's earning, Let's, let's do the math.
So someone who is earning $16.00 an hour and works 25 hours a
week, that's $400.00 a week before any taxes and deductions.
So times 52, that's $20,800 a year depending on where they
live, that is. I mean, in general, this is
below the poverty, poverty line because I think the poverty line
is in the 40s in the United States, at least it is I think
in New York. So depending on where they live
and what their cost of living is, this is potentially not
really a livable wage. So when a company says, Oh,
well, earned wage access doesn't promote saving or it's
counterintuitive to saving, it's just not a realistic part of the
conversation. If you as a business want your
employees to save more, that's separate because then it comes
into, it pulls into the the conversation.
What are people earning? Do you have a four O 1K match
program? Do you have four O 1K for people
who are working part time? Because someone working 25 hours
a week is most more often than not part time.
And do you have financial literacy programs?
That's what promotes saving. Earned wage access promotes
flexibility and engagement. So there are two totally
separate things. And it's not to say that someone
who has access to earned wage access products or services
isn't doing that in order to save.
But most likely that person is someone that needs to access
their wages when they need them because of expenses, not
necessarily because of investment or saving.
So, you know, to me as an employer if, or I should say as
an HR person for an employer that values earned wage access,
I think it's, you know, it's really interesting to hear the
opposite argument around saving or this being a loan.
Like it's just that's a, a mindset thing to me.
We have to change our mindsets. We have to really think who
again, who is the audience and what do they need?
What are they benefiting from when we institute or don't
institute these perks, right? Or these, it's not even a perk
actually. It's really just kind of, I
don't know, I guess we could say benefit because just like health
benefits aren't necessarily a perk.
They are a benefit of working for a particular company.
So let's let's call it a benefit because when we talk about a
perk, it's almost like saying, Oh, well, you get, you know, X
number of dollars for lunch reimbursements, But that's not
what this is. This is saying, hey, employee X,
you have access to the hours that you've already worked
because we understand that flexibility is really important
to you and your bills might not fall in the timeline that we pay
you on. So, you know, change the mindset
a little bit. Anyway, I kind of just want to
wrap by sharing a little bit more on this on this law.
So the article does talk about here, the earned wage access is
increasingly being offered to employees as a means to tap
their earned wages before a skit regularly scheduled payday.
And the article continues by saying that in contrast to the
South Carolina law, California and Connecticut have taken a
different track, moving to subject EWA payments to lending
laws that are provisions for policing interest rates and
dictating transparency. I am feel really strongly
against imposing interest rates on earned wage access
opportunities because again, these are earned wages.
To me, it's like, what is the, I guess I, I question what is the
difference between an employee taking out money from their bank
account, right? Let's say on, on a Friday when
their paycheck is, is dispersed to them versus a day a week, a
few days before when they've already earned those wages.
Again, it's, it's not, it's not access to wages before they've
been worked or they before they've been earned.
It's like an this employee who works 16 for $16.00 an hour,
works 25 hours a week. They've already worked 20 hours.
Why should they not be able to access those 20 hours?
Why is that a loan? They've all they're, they're
expected to receive that payment in on their next regularly
scheduled payday. Why would there be interest on
that? And ultimately, I also think
it's a company's decision that as much as regulation helps and
supports not only us in HR, but also it provides employees
greater safety Nets. And it does, you know,
regulation certainly keeps employers in check, so to speak.
There is such a thing as over regulation.
Like why? I really am curious as to why
earned wage, again, it's in the title.
Earned wage access would be considered a lending and
borrower relationship. Just doesn't make sense to me.
Anyway, that is my take on earned wage access.
I'm going to link in the show notes the article that I
referenced from HR Dive so you can take a look.
And if this is a topic that you really enjoyed and you want to
hear more about, let me know. You can message me on Instagram.
You can write me an e-mail at contact at hrtracy.com.
You could also reach out to me on LinkedIn.
I check my messages, but I have a lot of people to get back to.
So maternity leave is still kind of catching up to me.
So if you're one of the people that has messaged me and I have
not gotten back to you yet, don't worry, I will.
I apologize for the delay, but thank you for your patience.
Anyway. Thank you so much for hearing me
rant about earned wage access. And hopefully it's opened your
eyes to the possibilities of earned wage access.
And maybe this is something that you as an employer or as a
representative of an employer will maybe offer one day to your
employees, hourly or otherwise. Thank you so much for tuning in
this week. I'm sure we'll see you back here
next week. Don't forget to rate review and
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