Dive Brief:

• Yooz CFO John Gronen has decided against offering employees instant paycheck access next year, with the decision coming after he explored the potential new benefit and determined there was not sufficient interest to move forward.
• The Dallas, Texas-based accounts payable software company’s finance chief told CFO Dive in July that he was weighing the advantages, costs, and potential unintended consequences of offering the new benefit, also known as earned wage access. At the time, Gronen acknowledged personal reservations that EWA tools could lower budgeting support that he believes traditional monthly or semi-monthly paychecks provide. 
• “We decided to hold off for the next year on the EWA issue. No one was that excited about it here since most are reasonably well compensated,” Gronen said in a recent emailed response to questions. “We may revisit for 2027 if things have changed in the market or if there is more demand from our current staff.” ​​​

Dive Insight:

A growing number of states have begun passing laws friendly to EWA service providers since 2023, although the industry has also sparked controversy because of fees associated with some services, CFO Dive sister publication Payments Dive reported.  

Since the early 2010s, EWA companies have served employees directly or partnered with employers to give workers access to a portion of wages they’ve earned before payday, with the benefit gaining popularity in high-turnover industries like retail and hospitality for hourly workers, according to a June 2023 report from the Harvard Kennedy School. 

The offering’s advantages include liquidity “with minimal hassle,” while drawbacks include fees that can be similar to payday lending products and “the potential for overuse leading to a cycle of dependency that leaves workers worse off than when they started,” the report states. Advances can come with an average annual percentage rate of about 100%, but that’s below many payday loans which can be pegged to a rate of over 400%, The New York Times reported last year.

Gronen told CFO Dive in an interview over the summer that if he offered EWA, he believed the company should bear the cost. But he acknowledged he faced a kind of moral dilemma when considering it. 

“As a CFO, you want to make sure you’re doing the right thing for employees and kind of helping them not get into trouble,” Gronen sad. “There are a lot of benefits but the downsides scare me because some people get $1,000 or $100 today and they go spend it immediately and then when they get to the first of the month they no longer have money to pay the rent.”   

Gronen also said he proceeded to review the option over his own reservations because he believes benefits and employee satisfaction lead to higher retention rates.