How Financial Literacy, Employee Health & On-demand Wages Collide

At first glance, the connection between on-demand wages, employee health and actively-engaged team members might seem unclear. But the impact of finances on employee stress levels—and on-demand pay’s ability to mitigate that stress—makes expedited paydays an incredible benefit for the modern workforce.

April is National Financial Capability Month, which focuses on encouraging financial literacy. To celebrate, we want to talk about how financial stressors negatively impact employee health, and how early wage access can help alleviate that stress and encourage better money habits.

A Look at American Stressors

Anecdotally we’ve heard how rampant financial stress is, and ongoing studies continue confirming that. The Harris Poll conducted a study on behalf of the American Psychological Association (APA), releasing the results in October 2022.

Of the 3192 survey respondents, about 66% said they were either somewhat or significantly stressed about money and finances. More alarmingly, 90% of respondents said their household’s financial strain had either stayed the same or increased over the past year. Hand-in-hand with financial strain was the top source of stress across all survey participants: inflation.

Interspersed with these ongoing financial concerns are situations specific to workers like  unexpected company layoffs, a competitive labor market and wages that don’t keep up with inflation. These are just a few examples of financial stressors employees can deal with regularly. 

The Negative Impact of Financial Stress

Even for employees with health insurance, stress about the financial implications of a doctor’s visit may lend itself to exacerbated longer-term health conditions that doctors could’ve caught earlier if they’d reached out for help.

Many people are familiar with the symptoms of short-term stress, also known as acute stress. The heart beats quicker and harder. Muscles might tense. The individual might experience nausea or stomach pain. But when stress sticks around long-term, like during an extended period of financial difficulty, the impact on a person’s body is much greater.

Stomach pain could turn into acid reflux. Tense muscles can lead to regular migraines or tension headaches. A higher heart rate caused by stress hormones in the body can lead to a greater risk of high blood pressure, a heart attack or even a stroke. The person may struggle to fall or stay asleep, and tiredness can negatively impact their focus at work and in everyday life. They may even suffer from mental health issues like depression or anxiety.

What On-demand Wages Are

The most important thing to understand is that on-demand wages aren’t a loan. Most simply put, this benefit allows employees to access the wages they’ve already earned before payday. There’s no interest charged or money the employee has to pay back. At the end of each work day the employee receives access to a percentage of their earned wages. If they decide to access some of their earned wages before payday, that amount is simply deducted from their final paycheck.

There are many companies that allow employees early wage access, though each one operates slightly differently. We offer Pay on Demand™ to our customers because there are no fees, no transaction costs and no employee interest charges. Employers don’t need to front the funds, and with  Attendance on Demand™ there’s no impact on their existing payroll processes. It’s simple to integrate and the impact on employees is immense.

How On-demand Wages Can Help

Being stuck in a sort of “survival mode” caused by stress prevents employees from thriving. They need to meet their basic security needs, which include some level of financial wellness. There are a variety of reasons early wage access can help alleviate monetary stressors and give employees greater peace of mind as they tackle financial health.

Avoid Payday Loans

For those unaware, payday loans are generally frowned upon in the money lending world. Often described as “predatory” due to high interest rates for borrowers, payday loans aren’t subject to many of the regulations and standards of other lenders. Though the average payday loan is about two weeks, their annual percentage rate (APR) can reach 400% or more. Perhaps unsurprisingly, studies have shown a direct correlation between payday loans and negative health impacts.

By having access to earned wages more quickly, employees aren’t forced to live paycheck to paycheck. They’ll have cash more readily available if they ever need additional funds, and won’t need to pinch pennies until their next paycheck arrives. They also avoid the incredibly high interest rates implemented by lenders.

Reduce Bank Overdrafts

Employees struggling with finances commonly find themselves living paycheck to paycheck. In fact, about 60% of Americans do so. It isn’t uncommon for bank accounts to hit zero in those situations, or even fall into the negatives for a short period of time. Banks often charge an overdraft fee, about $35 on average per transaction while the account is overdrafted.

As you can probably imagine, overdraft fees can make a difficult financial situation even more precarious. With access to additional funds before payday, employees can avoid overdraft fees while still acquiring necessary goods and services.

Emergency Fund Access

Despite our best efforts, the unexpected happens sometimes. A medical emergency arises, a tire goes flat, gas prices jump or the heat goes out. For someone working to build up their savings after a financial downturn, emergencies like these can be catastrophic. While they may not need to dip into their next paycheck to pay for unexpected expenses, having those backup funds can make all the difference for someone trying to financially get ahead.

Build a Foundation of Financial Literacy

Adding a benefit like advance wages is only the beginning, and employers can support improved financial literacy for employees in other ways as well. Knowledge is necessary to understanding, so offering educational resources or classes on smart financial decision-making is often the first step toward improving their financial literacy.

Overall, offering a benefit like earned wage access can set employees on a path to improved financial standing and greater health. And by setting employees up for financial success, employers are not only supporting their team members’ goals, but also the future of their company.

To learn more about wage advance benefits like Pay on Demand, check out our dedicated webpage or shoot us a message. We’re happy to answer your questions!

The Role of On-Demand Pay Benefits in Competitive Recruiting

On-demand wages are simpler and more accessible to employers and employees than ever, boosting current employee engagement and strengthening recruitment strategies.

Download our myth-debunking guide to learn about the pros and cons of an on-demand pay benefit:

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