If the coronavirus has taught us anything, it’s to respect the substantial physical and psychological toll that comes with fearing for our health, loved ones, and our financial future.
And while this global pandemic may be unique in impact, millions of American workers face remarkably similar experiences in financial stress. In fact, it’s associated with a three times higher likelihood of anxiety attacks, four times higher likelihood of depression and suicidal thoughts, and, over the long term does “significant physical harm” to numerous vital bodily systems. This stress follows Americans into the workplace, where an estimated $500 billion is lost annually to lowered performance, absenteeism, and higher turnover.
It doesn’t have to be this way. Today’s organizations stand to gain powerfully from better understanding and responding to the kind of stress we’re all feeling now. Recent advancements in financial technology benefits provide a host of benefits to employers and workers alike. Here’s how.
Unanticipated emergency expenses can occur at any time, sending workers into a debt spiral.
Research shows that it’s unforeseeable emergency expenses—and the financially-inconvenient times when they arrive—that most often result in financial crises. A commuter facing a $250 car repair bill may find the expense tolerable the day after payday, for instance, but may not the day before. This experience is commonly shared, as nearly eighty percent of workers live paycheck to paycheck, and said that they worry about running out of money before payday on a weekly basis.
Workers snagged by such an expense then face credit card debts, overdraft charges, high-interest predatory payday loans, or other financial risks—all of which can pull workers into a debt cycle that many lack the resources to escape from.
Providing daily access to pay helps employees circumvent these financial pitfalls, allowing workers to more easily absorb sudden expenses by spreading the cost across the following month’s pay. Effectively, this transforms every working day into a potential payday. Employees hit with a sudden expense can enjoy a greater piece of mind and a restful night’s sleep, instead of picking up Uber shifts on short notice, or spending company time dealing with creditors.
Early-wage access, for instance, can reduce employee turnover by a staggering 20 to 40 percent, according to a study from the Harvard Kennedy School of Government. We estimate that the average retailer could save anywhere between $800 and $4,000 for each hourly worker.
Weekly pay may soon be obsolete
Companies like Uber and Lyft have been using same-day pay for years, and many more have more recently adopted or tested such benefits. Similar benefit are in use by 20 percent of Walmart employees and15 percent of General Health System employees. Church’s Chicken also recently launched a pay pilot program, in response to labor shortages.
There’s a tremendous demand for flexible pay benefits, too, according to researcher and author Rachel Scneider, of the Aspen Institute Financial Security Program. Scneider told the Associated Press that current pay system as ill-equipped to meet workers’ needs.
“It takes no extra effort or little effort, so leaving people subject to an outdated rhythm payment or cadence, there’s no real logic to it,” Schneider said.
Today’s organizations can affordably shield their employees from the destructive power of financial stress on human health and organizational functionality. Given the harsh symptoms Americans experience, putting an end to their financial insecurity means freeing up their mind—and schedules—for thoughtful work.
Lance Katigbak is Chief of Staff at Clair.