In today's economy, a significant portion of the workforce is grappling with financial challenges. A staggering 65% of hourly workers report running out of funds before their next paycheck, and 37% of gig workers have no emergency savings. These struggles are particularly pronounced among millennial gig workers and the 13% of American workers who are underbanked.
Workers often juggle multiple jobs, each with different rules and responsibilities, to make ends meet. Despite their efforts, many still struggle to cover basic expenses like housing and food. This financial stress can impact their ability to focus and perform at work.
How companies can address employees’ financial needs
The current system, where workers extend a two-week loan to their employers, is not sustainable. Thankfully, the tide is beginning to turn. Wages are slowly catching up with inflation, and employers are realizing the value of offering flexible pay options to their employees.
One of the financial innovations allowing for improved financial well being is faster wage access. The ability for workers to get faster access to earned wages provides stability and prevents a snowball effect of problems that can arise when an unexpected bill comes due and the employees’ payday is still days away.
WorkWhile, a platform for gig workers, recently conducted a survey revealing that 66% of workers who use its platform are actively working on improving their credit. The platform offers next-day pay or a weekly ACH transfer, with 90% of workers opting for next-day pay. This quick access to earnings is a significant draw for workers, ranking higher than scheduling flexibility, perks, benefits, and upskilling opportunities. The growing desire of workers to get accelerated access to their earned wages is also evident in recent Marqeta research, which shows that 80% of gig workers will choose a platform that pays them at the end of their shift or the end of their ride, whatever the setup is based on that particular app.
Rain is another solution that provides faster access to earned wages to help increase stability for both workers and businesses. Rain aims to solve the basic stability problem by giving employees access to their wages as soon as they've earned them. This approach not only helps employees but also assists employers with retention by providing a stable way of life that allows employees to return to work and progress in their careers. Rain’s platform makes it seamless for employers to offer earned wage access to employees.
Rain's service includes a next-day pay feature, which is integrated into the service fee charged to the customer for posting their shifts on the platform. This means that workers don't pay any extra to get paid the next day. Rain is also partnering with Marqeta to offer even faster, same-day pay, challenging the notion that low-wage workers should extend a two-week loan to their employers.
The power of faster wage access for retention
Providing faster access to earned wages is a crucial strategy for small businesses to improve employee retention, a significant concern in this sector. The stability that comes from immediate access to earned wages forms a solid foundation for employees, preventing them from resorting to drastic measures like taking up a day job in construction to meet unexpected expenses. This is particularly important when they are unable to request an advance from their employers and are days away from their next paycheck.
However, there are other ways small businesses can support their employees to help boost retention. For instance, offering full benefits for employees working part time and full time, life insurance, health insurance, generous PTO, wellness days and retirement investments are key for encouraging personal and financial wellness and retention.
The future of financial wellness for employees
With 80 million hourly workers in the market, it's clear that their needs and desires are varied. For example, hourly workers range from those in their first job to those who have worked in various roles like retail or fast food. This diversity means that a one-size-fits-all approach to financial tools and services is ineffective. Recognizing the range of needs among hourly workers is crucial in developing better solutions for their financial wellness.
Companies like WorkWhile and Rain are innovating to meet these varied needs, focusing on redistributing productivity benefits back to the workers. Looking to the future, WorkWhile is expanding its reach, promoting flexible work as a viable income source, especially among Gen Z who are embracing non-traditional work arrangements. Rain plans to develop real-time wage streaming, backed by a debit card, credit product, and checking account, to provide immediate access to funds for the unbanked.
These are a few examples of what’s next in worker payments. Looking more broadly, solutions should be aimed at helping users save money, even if they aren't currently well-served by the existing financial infrastructure. The approach is to create solutions that provide more than just a one-size-fits-all answer, recognizing the diverse needs of hourly workers.
