A study conducted by ADP, Inc. shows strong interest for earned wage access among employers and workers of all age groups, income levels, and educational levels, said an ADP, Inc. executive on June 22.
The study surveyed 600 businesses and over 1,000 workers in January 2022, said George Mavrantzas, ADP’s vice president of strategy and thought leadership, speaking at the American Payroll Association’s 2022 Virtual Congress.
Most employers expressed interest in earned wage access, Mavrantzas said. In the study, 90% of employers said they are at least somewhat aware of flexible pay options, and 55% of employers offer earned wage access to employees. Among the employers that do not offer earned wage access, 82% are interested in offering it but have three general concerns.
“Disinterest is driven by compliance, the cost and implementation of earned wage access, and the complexity of earned wage access,” he said. “Disinterest can be overcome if there’s no major impact on the current payroll process, it is simple to execute, and there’s minimal incremental work required.”
Other concerns include fees for using earned wage access and the number of transactions allowed within a pay period, he added.
Just over two-thirds of employers in the study are fine with their workers being charged fees to use earned wage access, and 92% of employers said there should be some limit on the number of earned wage access transactions allowed. Most employers preferred allowing only one or two earned wage access transactions per pay period.
“You want to have the ability to provide the remaining earned wages on your normal payday with the pay statement to the employee,” Mavrantzas said. “Earned wage access was designed to be a one-off, like paying a bill that arrives a few days before payday.”
Additionally, 92% of employers said that only a portion of an employee’s accrued wages should be available for early access, he added. Employers generally preferred 25% to 75% of an employee’s wages to be available, which is the same amount that most workers in the study typically withdraw in a transaction.
“In this case, we see remarkable agreement and cohesion between employers and employees in terms of the amounts that should be withdrawn,” he said. “A lot of this is a matter of preference and setting. But, in theory, 25% to 75% of wages seems to work fine for everyone.”
Many assume that only millennial and Generation Z workers support earned wage access, but Generation X and baby boomers are also interested, Mavrantzas said.
While 91% of millennial workers and 82% of Generation Z workers said it was important for their employer to offer earned wage access, 57% of Generation X and baby boomer workers said it was important to them as well. When earned wage access is offered, 84% of millennials, 81% of Generation Z, and 64% of Generation X and baby boomers say they used it at least once.
“Notice the figures for Generation X and baby boomers,” he said. “Even though it’s lower than Generation Z and millennials, it’s still almost two-thirds. Employees across generations definitely see the benefit and take advantage of it.”
These findings may underestimate of the number of times workers use earned wage access because workers often underestimate how much they use it, he added.
The reason workers use earned wage access differs by age group. Generation Z said they use it to reduce stress and have enough cash available until payday, millennials use it to buy groceries, and Generation X and baby boomers cited family-related expenses.
Interest for earned wage access also does not fluctuate based on the educational level and income level of workers. Roughly three-fourths of workers at every income level and educational level said it was important for their employer to offer earned wage access, Mavrantzas added.
“Both Generation Z and millennials say they should have more of a say in deciding when to access their pay,” he said. “Generation Z and millennials are now the most dominant generations in the workforce, and they definitely are thinking differently than Generation X and baby boomers.”