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Earned Wage Access: Here’s What You Need to Know
Earned Wage Access (EWA) is revolutionizing the way employees manage their finances by allowing them to access a portion of their earned wages before payday. This system alleviates financial stress and offers significant benefits for both employees and employers.
It’s a common struggle many workers face today. The paychecks come every couple of weeks or so…and the bills seemingly come every other day of the month. And the due dates on those bills don’t always line up with paydays.
Neither do unplanned expenses like car issues, appliance repairs, dental emergencies and so on. Shortfalls of cashflow between paychecks aren’t just stressful for your employees; they can lead to low morale and low productivity at the workplace.
Fortunately, there’s a payroll program that’s quickly gaining in popularity called “Earned Wage Access” that’s alleviating a lot of financial stress on employees. And it’s also delivering strong benefits to the companies that have adopted it.
What’s Earned Wage Access and how does it work?
Earned wage access (EWA) allows employees to access a portion of their earned wages on-demand, before their scheduled payday. Since it’s part of the payroll software, any accessed wages are automatically deducted from the worker’s paycheck. There’s nothing the company has to do.
For each transaction, there’s a small fee, typically less than $5.00, but for those with limited saving (which is a lot of us – 78% of Americans live paycheck to paycheck), it’s a far less expensive alternative than taking on high-interest payday loans or overdrawing their bank accounts.
Employers are also reaping the rewards of Earned Wage Access.
Companies are discovering that using an EWA program is a key recruiting and retention tool. A recent survey found that:
- 75% of employees say that the availability of EWA would influence their acceptance of a job offer.
- 78% of Gen Z and millennial employees say the EWA would increase their company loyalty.
- 59% of millennials would give priority to a job with an employer that offers this.
- 75% of workers across all age groups say it’s important for their employer to offer EWA.
Keep an eye out for regulatory and legislative responses.
EWA operates in a regulatory gray area. Some may argue it’s not technically credit, as there is no interest involved.
Earned Wage Access is not an advance either, as it only provides money an employee has already earned, just not yet been paid for. Also, EWA does not involve assessing the creditworthiness of any participating employee.
Still, lawyers are advising that various regulations on creditors and wage deductions may apply, depending on the state and a particular situation.
In May 2024, PayrollOrg noted that four states have so far passed EWA laws. Kansas, the most recent, clarified that EWA services are not loans, but according to PayrollOrg, “Providers are required to provide all payments on a non-recourse basis and must treat all fees as non-recourse payment obligations.”
Nevada, Missouri and Wisconsin are the other three states. All the laws are different, but generally require transparency on fees and a mechanism for communicating with employees.
Are you interested in offering Earned Wage Access to your employees? If you have questions, the team at Accu Data is happy to answer any questions you have about this popular new program or any other HR management or payroll questions you have.