Employees who run short of cash before the next payment cycle have traditionally sought relief in the form of a pay-day loan – but this can have severe consequences. The providers of pay-day loans often operate informally and charge exorbitant interest rates. This can lead to a cycle of indebtedness, impacting financial, mental and physical health.
As the cost of living continues to rise in South Africa against a background of low economic growth many employees are struggling to make ends meet. With no access to formal, secured credit, some 50% of workers take out an unsecured loan between their pay days. Only 1 out of 10 have cash left after paying bills.
Denise Neethling, Head of Marketing at earned wage access (EWA) company Paymenow said until quite recently there have been few alternatives to unsecured, high-interest pay-day loans. But the advent of earned wage access meant employees in need of cash for emergencies or unplanned expenses can easily access a portion of their already-earned wages.
In a recent report compiled by 60_Decibels analysing the financial and psychological impact of Paymenow’s EWA offering, 98% of women and 94% of men reported a decrease in borrowing from informal sources after using EWA, and 83% reported having increased cash on hand for use in emergencies.
“EWA offers clear benefits to employees,” said Neethling. “Financial stress can have a significant impact on an employee’s well-being and productivity. EWA can help alleviate this stress by providing employees with the ability to access their wages when they need it most. This can help them pay bills on time, avoid late fees and avoid taking on high-interest debt.
Paymenow’s EWA offering is completely free to employers, and despite this it offers several compelling benefits to employers, HR and payroll professionals as well as employees.
Neethling says that there are many advantages to offering EWA to employees and it not only demonstrates to your staff that you care about their financial well-being, but it can also then lead to increased loyalty and engagement as employees are more likely to stay with an employer that demonstrates that they are valued.
Financial stress can lead to absenteeism and impact an employee’s productivity, as they may need to take time off work to deal with financial issues and be distracted by financial worries.
By offering EWA, you can help alleviate this stress, reducing the likelihood that employees will need to take time off work for financial reasons and allowing employees to focus on their work and be more productive.
Paymenow has built a user experience around increasing financial education and encouraging responsible financial decisions. Employees using this EWA product learn to manage their finances and save for the future through a unique value-added service of financial education and gamification, further reducing stress and giving them control over their financial well-being.
As a result, 81% of Paymenow users reported quality of life improvements thanks to the app, and 67% reported they experienced less stress.
EWA can be a valuable benefit for your staff, providing them with a more flexible and convenient way to manage their finances. By introducing EWA to your payroll you can improve the financial wellness of your staff, increase loyalty, reduce absenteeism, improve productivity and save costs.
“Integrating EWA into your business offers the perfect opportunity to bring financial wellness and education into your workplace,” concludes Neethling. “Taking care of your employees’ well-being also improves your bottom line.”
