Even if your employees make enough money to pay all their bills, they may struggle when they’re due all at once and payday is still a few days away. To address this challenge, many companies are introducing early payday apps that allow workers to receive a portion of their income before payday.

In this article, we’ll explore how these apps work and why they’re increasingly recognized as an effective way to improve employee retention and loyalty.

What Are Early Payday Apps?

Early payday apps—also known as on-demand pay and Earned Wage Access (EWA)—are increasingly popular services that offer employees early pay for work they’ve already completed but haven’t yet received a paycheck for.

Key Features of Early Payday Apps

Early payday apps is an umbrella term for digital tools that pay out workers’ earned wages early; however, there are important distinctions between different types of programs. Some apps are integrated directly into employers’ payroll systems to allow employees to draw some of their wages in advance and collect a smaller paycheck on their regular payday. In some cases, companies cover their employees’ fees for early wage programs so they can receive their wages earlier at no extra charge, while others charge a small fee per transaction depending on the amount the employee requests.

It’s important to note that early payday apps don’t conduct hard or soft credit checks. Instead, they determine how much a worker can withdraw early based on payroll data and the limits set by the employer.

Direct-to-consumer early pay programs, also known as cash advance apps function more like loans, issuing employees their wages in advance based on what they say (and can prove) they’ll earn.

The Difference Between Early Payday Apps and Payday Loans

Payday apps differ from payday loans because they charge lower interest rates and fees; some come with zero interest and fees. In contrast, payday loans are among the most expensive loan types available, with high interest rates that can increase the initial loan amount significantly.

Why Employees Love Early Payday Options

American workers are increasingly feeling the impacts of inflation, with 44% of full-time employees reporting that inflation has had a major or severe impact on their financial situation over the past year. To make matters worse, almost 6 in 10 workers report that their compensation isn’t keeping up with the rising cost of living.

With their flexible payment schedules, early payday apps provide a convenient, low-cost, dignified solution for workers who find themselves short on cash in between paydays. By eliminating the need to wait for payday, on-demand pay helps alleviate employees’ financial worries, leading to higher job satisfaction and improved mental well-being.

Additionally, having the ability to access their earnings whenever necessary can give workers a feeling of greater financial control and security.

The Link Between Early Payday Apps and Employee Satisfaction, Loyalty, and Retention

On-demand pay is generally linked to a more positive and engaged workforce because it reduces workers’ financial stress by providing them with immediate access to funds when they need it most. And when employees are less worried about finances, they tend to be more satisfied, engaged in their work, and productive.

Offering early payday apps can also help organizations attract and retain top talent. It sends a signal that they’re compassionate employers who understand their workers may be facing economic hardship and are committed to offering meaningful solutions that help them make ends meet. Consider these sobering statistics that illustrate the connection between money worries and turnover in the workplace:

• Financially stressed employees are more likely to leave: Only 54% of financially stressed workers feel there’s a promising future for them at their employer, compared to 69% of employees who aren’t stressed about their finances.
• Financially stressed employees are also twice as likely to be looking for a new job (36% of financially stressed employees compared to only 18% of non-financially stressed employees).
• Almost three-quarters of financially stressed workers say they would be attracted to another employer who cares more about their financial well-being compared to just 54% of non-financially stressed employees.

Testimonials and Success Stories

Urban Outfitters Help Employees Navigate Economic Realities

Urban Outfitters recognized a challenge their workforce was facing. Many staff members faced a harsh reality: with the rising cost of living, essentials like bus fare, subway, or gas money became daily obstacles, making it difficult to get to work and manage everyday expenses.

Urban Outfitters previously offered small employee loans to help bridge these gaps but as the number of requests for payday advances grew, they wanted to look into a more scalable and sustainable solution.

The team decided to look into solutions designed to improve financial outcomes, particularly Earned Wage Access from Payactiv. With EWA, they found a way to address these critical needs directly and empower their team members to access funds for transportation, childcare, food, and other essentials.

Read the full case study.

Norman Regional Health System Addresses Workplace Financial Stress

As part of its efforts to boost retention and recruitment, Norman Health Regional Health System (NRHS) asked employees for input on what they valued most. Financial stress quickly emerged as a major issue negatively impacting many employees’ overall personal well-being.

“We received overwhelming feedback that widespread job losses in the community and rising inflation were affecting our people’s finances and often their ability to afford basic necessities. All this was having a devastating toll on their overall personal wellness.”

• Brittni McGill, Chief Nursing Officer and Co-Chair of NRHS’ Recruitment and Retention Committee

Payactiv directly addresses employees’ struggles to make ends meet between paychecks. With Payactiv, NRHS gave its employees a dignified way to ensure they could meet their financial needs.

“The level of gratitude we’ve received from our employees for helping them address their financial worries has been overwhelming. But for us, the best thing is knowing that our people are now in a place where they can function at their best both personally and professionally.”

• Brittni McGill, Chief Nursing Officer and Co-Chair of NRHS’ Recruitment and Retention Committee

Read the full case study.

Why Payactiv Stands Out

Before Payactiv created EWA in 2012, workers could only bridge the gap between needing money and getting paid with late and overdraft fees or expensive payday loans. Now, those funds go where they belong—in workers’ pockets and back into our economy.

Our vision is simple—bring financial security, dignity, and savings to the millions experiencing financial stress. We know that building a financial technology business requires more than great technology and amazing design. It requires a profitable yet socially responsible business model and a deep commitment to improving the lives of our users. Our tools, resources, and thought leadership help employers build workplaces where people are not only valued but empowered.

In addition to EWA, Payactiv users benefit from:

• Discounts: Employees can save money on prescription medications and other everyday items by finding deals in the app’s discount marketplace.
• Savings: Our app makes it easy for employees to know at a glance how much they can put into savings based on upcoming bills and spending patterns.
• Financial Education: Employees get free access to financial learning articles and appointments with professional financial coaches.

Explore how Payactiv can reinvigorate your employee retention and satisfaction efforts and help you build loyal, motivated, and high-performing teams that drive unparalleled business success.

All content provided on Payactiv.com/financial-learning/ is for informational purposes only. Payactiv makes no representations as to the accuracy or completeness of any information on this site or found by following any link from this site. Payactiv will not be liable for any errors or omissions in this information nor for the availability of this information. Payactiv will not be liable for any losses, injuries, or damages from the display or use of this information.