Small businesses play a critical role in the American economy. There are approximately 33.2 million of them in the United States, employing nearly half of U.S. workers and representing 99.9% of all businesses in the country. Employees of those small businesses are essential to the fabric of our communities and our daily lives.
However, despite cooling inflation and historically low unemployment rates, American workers–especially those employed by small businesses–struggle to make ends meet. A recent CNN poll found that 39% of Americans worry about paying their bills most or all of the time.
To avoid falling into debt, millions of Americans are turning to gig jobs such as driving an Uber or delivering for DoorDash. In fact, according to data from Bankrate’s Side Hustles Survey, more than one-third of U.S. adults earn extra money beyond their main source of income through a side hustle. The instant liquidity that many of these gig jobs provide is vital for workers with impending bills and expenses, and gives these companies a competitive advantage in attracting workers. If you earn money driving an Uber today, you can get paid today–which means the phone bill can be paid today, or the babysitter gets paid today.
Unfortunately, most small businesses run payroll either weekly or biweekly. Often, a small business owner will have to consider whether to float an employee an advance on their paycheck if the employee is in a bind and needs to get paid before payday. However, advances in payroll technology have created a solution for these all too familiar situations.
Earned wage access (“EWA”) is an employer-sponsored financial wellness benefit that empowers employees with choice and control over their pay. For a small fee or no fee at all, employees can access their earned pay in real-time to pay bills, spend, save, or invest on their own schedule, instead of waiting on an arbitrary payday. This gives employees the ability for much-needed financial liquidity, similar to what gig jobs might offer. Plus, with EWA, workers can avoid more expensive and predatory options to make ends meet. According to research from the Aite Novarica Group, commissioned by DailyPay, a leading EWA provider, 95% of those who were previously reliant on payday loans in any way either stopped using payday loans (81%) or reduced use (15%) after using DailyPay.
Best of all: for small businesses, offering EWA sends a powerful message to prospective employees about access to earned pay. Research from the Hanover Group shows that 96% of companies offering an earned wage access solution today believe it has a positive impact on employee recruiting. And 86% of companies with an earned wage access solution believe it is helping them stand out from the competition.
For a small business, recruiting and retaining an engaged workforce can be critical to survival. Employee turnover is costly. In fact, replacing an employee can run into the thousands of dollars, with a bevy of costs including advertising the position, interviewing candidates, and training the new hire. So when an employee quits to drive an Uber full-time or asks to cut their hours to accommodate a gig job, it’s the small business that suffers. Not only do they lose an experienced employee, but they lose a connection to the community – especially in customer-facing roles.
Of course, no small business wants to incur extra costs or spend valuable time implementing a new system. Fortunately, implementing earned wage access is typically a light lift as well on the small business. Most earned wage access solutions integrate seamlessly with a company’s payroll and time management systems, often requiring little or no extra work for the company. And there is typically not a charge to the company to offer the benefit.
The world of work has changed. Employees need benefits that make a positive impact in and out of work. The rise of gig jobs provide the flexibility employees are looking for in everything from time to pay. Small businesses are taking note and actively looking to gain a competitive advantage by offering earned wage access. As we all know, small businesses are an integral part of the fabric of this country – let’s give them every opportunity to thrive.
Jake Forsland, General Manager, Small Business, DailyPay.
Small businesses stock image by PeopleImages.com – Yuri A/Shutterstock
