When many brick-and-mortar retailers closed their doors during the COVID-19 pandemic, cutting operational costs, including payroll, was a primary concern for business owners. Three years later, the retail sector is facing a very different set of challenges. Last quarter, the retail sector’s growth rate outstripped pre-pandemic levels. While that’s a positive trend for retail overall, many companies have struggled to hire and retain employees to power their growing businesses. Recruitment and retention have become key priorities, prompting the question: In a competitive labor market, how should retailers differentiate themselves as employers?
The answer may come most clearly from understanding the retail workforce itself. The majority of retail employees are hourly earners, meaning that their take-home pay is often variable depending on circumstances like health and family obligations that impact the flexibility of their schedules and availability to work. This compensation structure, combined with the market rate for hourly retail labor, which the Bureau of Labor and Statistics reports averages $34,760 annually, adds complexity to the personal finances of many employees.
Without immediate access to payments for complete shifts, it’s easy to see the appeal of other debt and lending solutions that require interest charges or other fees. The Consumer Financial Protection Bureau reports that 12 million Americans leverage payday loans annually - despite the costly terms often associated with these types of instruments.
In this environment, employers can differentiate themselves by providing supportive financial services that empower their employees to navigate their personal finances without relying on high-interests loans or taking on unsecured debt.
Accelerated Wage Access (AWA), which can provide rapid payment after a shift is completed, is one emerging example of a use case that employers can use as a differentiator in the competitive labor market. Real-time visibility enables employees to more accurately understand their earnings throughout the course of a month, allowing them to act on shortfalls by picking up more hours, cutting their expenses or proactively planning to cover any deficit.
The peace of mind that this level of immediate transparency provides is often a driver of improved employee experience. It’s also a key operational tool for employers to quickly identify potential payment errors that can spark discontent or damage employee trust and satisfaction on the job. Through payment upon completion of a shift and transparent user interface, many AWA tools help identify any potential payroll mistakes earlier than a regular paycheck cadence. Whether it be correct hours or pay rate, AWA provides clarity to both employee and employer immediately vs. the delay of waiting until the end of a pay cycle.
Similarly, AWA empowers employers to implement responsive incentives faster, letting employees see an immediate effect of their high performance and subsequent recognition. Whether it’s a one-time bonus or a pay-raise, high-performing employees can be rewarded in real time, providing a level of instant validation that’s not possible within a biweekly or monthly pay period. It’s an operational efficiency that benefits both employers and employees.
During the pandemic, many retailers were prompted to examine their operating expenses and make unexpected adjustments. Although we’ve come a long way since then, the importance of operational efficiency in unlocking value for businesses is still key. Now, with concepts like AWA, that principle is being applied in new ways, streaming lining processes for both business owners and their employees. It’s a win/win.
Rachel Huber is market intelligence lead at Marqeta, a modern card issuing platform.