Winning the Payroll Vote for Flexible Pay

What if your employees could access their earned wages instantly, at their convenience, rather than waiting for a traditional bi-weekly or monthly payday? That’s the idea behind Earned Wage Access (EWA), also known as InstantPay, a rapidly evolving trend in workforce financial management.

Earned Wage Access provides a modern and employee-friendly solution to the cash flow issues employees often face between traditional paydays. By allowing employees access to their already-earned wages before the scheduled payday, employers will likely get results including:

• Enhanced Employee Satisfaction: Immediate access to earned wages can alleviate financial stress and build trust.
  Improved Recruitment and Retention: By providing an increasingly sought-after benefit, companies can attract and retain quality talent.
• Aligned with Modern Needs: As living expenses grow, more frequent access to wages helps employees manage their finances more effectively.
• Operational Benefits: With more flexible pay options, employees are more likely to fill open shifts faster and more frequently.

The Two-Week Pay Cycle: Half a Leap Forward

The two-week pay cycle can trace its origins back to the complexities of handling payroll manually. It provided a compromise that balanced the administrative burden with employees’ financial needs. In the age of paper and pen, processing payroll required significant time and effort. The two-week cycle allowed enough time for the necessary calculations, deductions, and checks. Even at the dawn of the digital age, computing power was slow enough that companies still needed more time to process payroll for large workforces. However, this traditional cycle may no longer be the best fit in today’s digital age.

The Path to Flexible Pay

As we were building and rolling out Legion InstantPay, we spoke with dozens of payroll, HR, and Legal teams about their concerns and perceived risks with the concept. We’ve consulted with legal experts far and wide. Three key questions that are consistently raised are:

1. Is EWA legal?
2. Will we have to change payroll processes?
3. What is the level of investment from IT to set up and maintain the interfaces to EWA solution providers?

Legal Framework

First, let us address the legal framework. The Consumer Financial Protection Bureau (CFPB) took early control over investigating and ruling on some legal concerns around Earned Wage Access. States are also using the CFPB rulings and beginning to craft their own legislation. Nevada and Missouri recently released their guidelines. The rulings essentially affirm that EWA is not a loan and set up a registration and certification program for EWA providers to provide oversight for their citizens. We at Legion and our partner Wagestream welcome this new legislation.

What is becoming increasingly clear is the notion that an EWA program that the employer sponsors, that is integrated with the timekeeping and payroll systems of the company, that provides fair and equitable access to wages that are already earned are going to pass legal muster.

At Legion, we’re fortunate enough to have a strong partnership with a world-class EWA provider in Wagestream. We’ve also packed our advisory board with industry pioneers, including Daniel Eckert—former SVP of Walmart Services and Digital Acceleration. Daniel was responsible for deploying EWA within Walmart’s One Million+ US Workforce.

With a strong partner and industry expertise, we are confident that we’ve built an EWA solution that is compliant and fully integrated into our award-winning workforce management platform. You can learn more about Daniel’s successful fintech transformation at Walmart and the benefits of Legion integrated with EWA by watching our webcast “Financial Wellness: The Secret Sauce for Improving the Lives of Hourly Workers”

Payroll Process Stability

While the benefits are substantial, implementing a standalone EWA solution can present several payroll challenges. Payroll departments, already dealing with the complexity of wages, taxes, benefits, and deductions, must adapt to the continuous changes associated with EWA. Traditional payroll systems may not be equipped to handle the real-time wage calculations and disbursements needed for such a program. Furthermore, adhering to local, state, and federal wage and hour laws complicates the task even further.

This is where Legion can bridge the gap. Legion uses AI and machine learning to automate and streamline many workforce management tasks, making EWA implementation more manageable. Legion already has all the data needed to conduct an EWA program, including real-time wage calculation, and timesheet approval automation. In addition, Legion’s standard integrations and APIs mean that no changes are needed in payroll processing to account for EWA distributions.

IT Considerations

Employee engagement has improved significantly with the use of Legion’s Workforce Management. Legion’s highly-rated mobile app, with its user-friendly interface, has been lauded for its easy access and interaction, increasing its usage. This results in more employees opting into the EWA program, ultimately leading to a happier, more engaged workforce.

EWA solutions that exist in isolation from the rest of a company’s payroll system can create:

• Data Integration Issues: Difficulty in accurately syncing data between separate systems.
• Compliance Risks: Standalone EWA apps may not always adhere to specific legal requirements, creating liabilities.
• Security Risks: Employees may have to create separate accounts, download additional apps, and provide personal financial information.

With Legion, EWA program data can be easily integrated and processed using information already present. This unique capability simplifies payroll administration’s task of tracking and accounting for early wage access, making EWA a much more feasible option for businesses to adopt. It also eliminates the need for double entry and the risk of data entry errors, ensuring accurate and efficient wage calculations.

Through our platform, Legion removes the IT complexities involved in implementing EWA and enables seamless compliance with local, state, and federal wage and hour laws. By intelligently generating schedules and automating timesheet creation, Legion ensures precise and timely payroll data, forming a solid foundation for an EWA system.

Conclusion

In conclusion, the benefits of an Earned Wage Access program are substantial for both employees and employers, fostering improved financial well-being, engagement, and retention. Although implementing EWA may initially appear daunting, with the right tools and partners, such as Legion, it becomes a practical and highly advantageous venture.

Companies need to stay ahead of the curve in an era where employee satisfaction and retention are key determinants of business success. Incorporating an Earned Wage Access program that provides flexible pay options for frontline workers through Legion’s Workforce Management is an evolutionary step towards modernizing your payroll system and fostering a happier, more engaged workforce. Schedule a demo today.