• With 58% of Americans living paycheck to paycheck, offering earned wage access (EWA), or on-demand pay, can help restaurants recruit and retain employees and ease their money worries.
  • Before choosing an EWA partner, restaurateurs need to understand the three EWA models to determine which is best for their employees.

Related: How Brenen’s Restaurant Group retains its best employees

In today’s competitive labor market, employers are always looking for new ways to recruit and retain employees. And in the quick-service restaurant industry, where turnover averages more than 150% annually, employers are strengthening their benefits programs in order to differentiate themselves from the competition. One solution that is gaining traction is earned wage access (EWA), a payment method that allows employees to access a portion of their pay when they earn it, rather than on a weekly, bi-weekly or monthly schedule.

In uncertain economic times, where more than 58% of Americans are living paycheck to paycheck, the narrative around EWA, also called on-demand pay, sometimes paints a picture of payday lending in disguise. That simply is not the case when employers partner with a responsible, fee-free provider. In fact, consumer advocates acknowledge that EWA apps are an improvement over payday loans because they don’t charge exorbitant fees or interest.

How the Restaurant Industry Can Use EWA Effectively
In its 2022 state-of-the-industry report, the National Restaurant Association found that 78% of restaurant operators do not have enough employees to support consumer demand and 70% of restaurant owners feel they are short of mission-critical staff. EWA programs can help by incentivizing employees through immediate access to their wages. In fact, 95% of restaurant workers would rather work for an employer that offers earned wage access.

Furthermore, of employees who report worrying about finances at work, 43% say they spend around 3 hours a week being distracted by money stress on the job. EWA can help ease those worries and increase focus at work. Allowing employees to choose how and when they access their wages enhances financial wellness and improves employee morale by giving them more control over their own money.

As an industry that often employs younger generations, restaurant operators must keep up with the demands and expectations of this ever-changing workforce. In 2022, Gen Z has taken advantage of labor shortages in order to redefine the workplace, becoming the generation most likely to switch jobs and land higher pay increases. According to research from Instant Financial and the Center for Generational Kinetics, 87% of Gen Z would be more interested in applying for a job that pays the same day. By offering EWA or letting employees get immediate access to their tips right after they work, restaurateurs can keep up with the pace of change in the industry and provide benefits their employees want and need.

Three Models of EWA
Before choosing an EWA partner, it’s crucial to understand the different types of EWA programs.

There are three main models in the market today: the deduction model, the wage assignment model, and the responsible model. Businesses must understand the details of each model to ensure compliance with pay regulations and to determine which is best for their employees.

The Deduction Model of on-demand pay requires earned wage access deductions to be taken on the employee pay stub. This model is restricted in more than 14 states and brings minimum wage requirements into question, thus exposing the employer to risk associated with state labor regulations.

The Wage Assignment Model of delivering on-demand pay requires participating employees to reroute the direct deposit of their pay to the EWA vendor, using the vendor’s pooled account, where wages are held. This model is also prohibited in multiple states, including Maryland, New Jersey, Illinois, Virginia, New York and others. Additionally, employees’ money is not safeguarded and FDIC insurance isn’t applicable if the vendor doesn’t have a money transmission license.

The Responsible Model of delivering on-demand pay, pioneered by Instant Financial, is the only solution that protects the employer from risk and protects the employee from predatory fees, while being fully compliant in 50 states. This model gives the employee full transparency, control and instant access to pay on the employee’s terms, free of any expense that ultimately separates them from their hard-earned and well-deserved money.

Responsible Earned Wage Access in Action
GPS Hospitality, a franchisee of multiple quick-service restaurants including Pizza Hut, Burger King and Popeyes Louisiana Kitchen, started using EWA in 2018, and more than a quarter of their employees currently use the program. The employees that elect to use EWA work in a variety of restaurant roles, such as servers, delivery drivers, cooks, shift leaders and even assistant managers.

“It’s no secret that the restaurant industry is struggling post-pandemic,” said Christy Wasdin, director, payroll & HRIS, for GPS Hospitality. “The ability to be able to provide the level of service that our guests expect is very hard when we’re not fully staffed. We’re always on the lookout for anything that can improve recruiting and retention efforts. We were early in seeing that EWA could do that, and it’s really served us well post-pandemic. Anything we can do to encourage employees to come to work, we’re going to do.”

By using a responsible earned wage access program, GPS has been able to offer on-demand pay as a core benefit for their employees by not burdening them with unnecessary fees or costs.

To encourage financial wellness and develop responsible spending habits, Instant Pay users are only able to access 50% of their wages at their hourly pre-tax rate.

Since implementing earned wage access, GPS has also seen an improvement in turnover rates. GPS has seen other benefits from providing EWA as well, perhaps the most important being an increase in employee availability. If someone calls out at the last minute, managers are able to get employees to cover more shifts since they have the ability to get paid sooner.

Instant Pay is the Future
As the quick-service restaurant industry forges a new post-pandemic path, employees will continue to demand more control over their own wages. EWA programs enable this, even allowing managers to electronically pay out tips immediately to staff instead of manually. Successful implementation of responsible earned wage access programs like these is both possible and mutually beneficial.

Tal Clark is the chief executive officer at Instant Financial, where he leads the organizational strategy behind the industry’s leading responsible earned wage access solution. Previous to working at Instant, Clark worked at Money Network as a member of the prepaid card team. In 2008, First Data bought Money Network; from there he continued his career at First Data in various leadership roles through 2018. One of those roles was general manager of the Money Network business.