Not all On Demand Pay Vendors are the same, be SURE you know what you're getting!

If you know me, you know I am obsessed with ensuring HR professionals are business leaders who work in the People space and I am always on the lookout for new strategies, tools and technologies to help make this happen.  

As I’ve shared, holistically supporting your employees well-being is critical to building meaningful and long lasting employment relationships. This means bringing forward programs and offerings that truly enhance their lives in ways not directly tied to their productivity or efficiency scores.

A few months ago I wrote an article about the critical importance of On Demand Pay (sometimes known as Earned Wage Access). In my piece, I summarized the critical factors every HR leader must consider when choosing a trusted, On Demand Pay solution and provider. Making the right decision will boost your employee’s financial wellness and your organizations ability to retain great talent. 

The response to my article was really positive. Many people reached out with great questions and comments and as I have implemented and continue to recommend On Demand Pay solutions to my clients and those I coach, I always want to take deeper looks into the landscape of product offerings.  

Imagine my surprise when I learned that Walgreens, a top retailer, chose to engage with a payday loan company called, Earnin’ to offer their employees pay day loans. Let me be clear, I’m an advocate of on-demand pay solutions, I do NOT advocate for any form of payday loan.

Being the curious person I am, I had to look deeper and when I did, I found quite a bit of information that, well, let’s just say, is concerning. When looking at Earnin’ I found at least two sources sharing behind the scenes insights from former Earnin’ employees clearly stating that what they were “selling” wasn’t what they were actually doing. 

This, along with inquiries from the New York Department of Financial Services, 28 subpeonas and numerous complaints to financial regulators and consumer watchdog groups, I have even more reservations about this product than I did before. Check out the articles here and here to read them for yourself.

You may be wondering why I am even sharing all of this. I’ll tell you why. It’s important for folks to have clarity around the products and services they are offering their employees, especially financial products and services.

I can’t imagine why Walgreen’s made the decision to offer a payday loan option to their employee’s rather than a more sophisticated on demand pay solution that offer access only to already earned wages verified by the employer, which is what I support and most large employers offer.

Similar to a payday loan company, Earnin’ acts like a short term lender, advancing the employee cash based on previous earnings patterns and then debiting the employees bank account on payday. This model has potentially harmful ramifications and can easily cause employees to become significantly over extended and in a worse financial position than they were before the loan. 

It seems they have tried to tap into the altruistic side of employee’s and ask only for a “tip” vs charging an actual fee. The problem here, however, is that the tips were somehow directly tied to how much money the employee could access. In essence, the more you tipped, the more money you would be loaned. This among other concerns has resulted in some serious allegations and investigations into the company.

The right on-demand pay vendor can have a profound impact on one’s financial situation, in very positive ways. Having the power of choice and control of your earned income has become a truly essential benefit as we emerge from the global pandemic. Bills can be paid on time. Reliance on payday loans or incurring overdraft fees can be a thing of the past. The vicious cycle of debt can be broken. 

 Imagine the financial and work-related snowball effect when an employee gets a flat tire on their way to work and they don’t have enough financial resources to replace or repair the flat tire. Not only does the employee have the expense of replacing or repairing the tire they will at best be late to work and typically they will not make it to work at all that day. Missing work without notice can lead to disciplinary issues for the employee and additional burden on co-workers who have to pick up the extra work not completed by the absent employee. If the employee has to take out a pay day loan, they are likely placing themselves even further behind financially vs accessing their own already earned wages, avoiding interest penalties and additional overdrafts when the loan is then pulled out of their checking account.

As organizations around the globe are faced with, “The Great Resignation”, the war for talent is hotter than ever. Attracting and retaining talent is top of mind for all employers and employees are seeking out employers who are offering more flexibility in all aspects of the relationship…and yes, your paycheck is one of those areas.

 Prioritizing physical, psychological and financial well-being must be at the forefront of your People Strategy to attracting and retaining talent, and building a thriving, People First culture and in this case, I sure hope Walgreens reconsiders their choice of on demand pay vendor that appears to be a wolf in sheep's clothing.