Earned wage access (EWA) is a buzz phrase that professionals in the payroll industry may have been hearing more and more as of late. These programs are offered by some major employers such as Walmart and McDonalds, and the perk can be used as a benefit to attract and retain employees. EWA has gained even more popularity with the growth of the gig economy and companies specializing in products that make EWA easy for businesses to adopt and offer to their employees.
What is Earned Wage Access?
Also referred to as instant pay or on-demand pay, these are programs that Ear By doing so, it offers flexibility that some employees may need to meet financial obligations or to just get paid on a schedule that works better for their situation, especially for those currently being paid on a biweekly or semi-monthly basis. With most of these vendors utilizing electronic payment methods, it can also be an effective way for businesses to get more of their employees to opt-out of receiving paper checks.
EWA providers may limit the number of transactions during a period, or set restrictions on how much of an employee’s earnings can be accessed through the program. Some vendors may also have transaction fees which are charged with each employee’s request for an early transfer or withdrawal. These rules serve as a way to protect both the employer and vendor from overextending and being caught in a position where they don’t have the ability to collect on the money they have already paid out. It can also be argued that the limits and fees help with more responsible use of this perk, with employees only utilizing the service when absolutely necessary.
These might sound like great benefits for an organization to offer its employees, but there can be downsides to EWA programs as well, and businesses should do their research before deciding to implement a solution and work with a vendor. It’s important to remember that rules may vary from state to state, and not all solutions may be compliant with every state a business operates or has employees in. Methods for distributing funds to employees can also vary, with some providers only allowing ACH transactions, and others allowing immediate credit to a vendor-specific debit card. In the case of ACH transactions, these might not always allow for immediate access to funds, depending on the bank and the ACH schedule. Some also see the limits and fees as another form of a payday loan, which is counterintuitive to the idea that EWA should empower employees who are tight on money. Many EWA solutions are third-party applications that link to the organization’s HRIS or payroll system, which may require additional time and resources spent by the payroll team to manage yet another platform to perform their work.
Consider the Pros and Cons of EWA
There are both benefits and downsides to implementing an EWA program in an organization. While EWA may offer a way to attract and retain more talent, there can be added fees and costs to the program, and it may also result in added administrative burden to the team. It is encouraged for every business that is considering adopting this type of program to do its due diligence and make sure they are making the right decision for their company. Valor Payroll Solutions helps companies decide if EWA is a wise move for their specific situation through our payroll consulting service. Please let us know if you have any questions about this, or any other, payroll related topic.