12 July 2023
Nest Insight has conducted research into the use of Earned Wage Access (EWA) and workplace loan solutions in supporting financial wellbeing in the workplace. As EWA becomes more popular and employers search for more ways to play a part in supporting wellbeing research like this will be pivotal in our understanding of the schemes and how we can best implement them.
The CIPP policy team get asked about EWA a lot, and our thoughts and feelings can be personal and circumstantial. So, lets dive into this research and see if we can pull out some key findings that can inform our decisions in this area and be better informed.
To ensure we are all on the same page, here is Nest’s explanation of EWA:
Employees can access some of the pay they’ve already earned before their usual pay day. They’re able to access small amounts of money quickly, usually through a third-party app. There’s often a small fee of £1 to £2 to use the service, although sometimes this fee is subsidised by the employer. The amount of pay that can be accessed is usually limited, for example to 25% to 50% of earned wages.
According to the report, only one in ten employers currently offer the service and it is much more likely to be offered by large employers.
It may seem obvious that we need to set ourselves up for good financial footing, but there are a number of ways in which poor financial footing can effect low and medium income earners. The report identifies six key financial footings:
- Improving financial resilience today
- Escaping the poverty premium
- Managing unpredictable or seasonal income
- Reacting to financial shocks
- Planning for financial needs in the future
- Budgeting for smaller events that can be planned for
- Building resource for milestone events
- Progressing financially
The report explores the ways in which EWA can be a more beneficial route to emergency access to money over traditional alternatives such as credit cards, overdrafts and bank loans. However, it is key that a route to adequate savings should be encouraged as this will always come without a fee, without interest and can be replenished on an individual’s own schedule.
Key takeaways on best practice from the report are:
- understanding employees’ needs before designing and implementing solutions
- offering comprehensive financial wellbeing benefits that employees can use to support short-, medium[1]and long-term financial goals and challenges
- choosing an EWA provider that is signed up to the forthcoming code of conduct and ensuring there are relevant controls in place for vulnerable customers
- focusing loans on supporting workers to gain stability and increase their long-term earning potential
- providing pathways from debt and EWA into saving
- taking an integrated approach across the organisation, including better integration of mental health and financial wellbeing supports.
The report is a big one, but if you are planning in implementing any of the researched benefits for your employees it could be beneficial to see what employees and employers have to say about them. As these packages become more commonplace and desirable, more companies will feel required to implement them to keep up with labour market expectations. Make sure you do your research and introduce them responsibly for them to have the best, most beneficial impact possible.
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