Earned Wage Access (EWA) is an increasingly popular financial wellness solution. EWA gives employees access to their already earned wages that they would otherwise have to wait until their next payday for. For millions of Australians, there is a severe misalignment between the monthly paycheck and the myriad of bills and unexpected expenses that need to be met.
The mis-timing of income and expenses all too often creates a personal cash flow shortfall which is dealt with in a range of unhealthy ways. Dangerous, high-interest payday loans, overdrafts, credit cards are common offenders, with interest charges and other late fees eating further into the problem. EWA plays a role in solving this serious issue, although it is often misunderstood, to the detriment of both employees and their employers. Let’s take a look at eight of the most pertinent questions for employers:
#1 Is it going to add more work for payroll?
No. EWA is an excellent solution because you don’t have to change anything in your approach to how payroll is currently done. Payroll operates as usual; it all integrates seamlessly – you don’t have to process anything different on behalf of your employees for EWA to work. The technology works seamlessly in the background.
#2 Won’t readily available wages make budgeting harder for employees?
Your employees are already struggling because their pay does not match their bills and other unexpected outgoings. EWA allows them to flexibly access their earned wages when and if they need it, saving potentially hundreds of dollars a quarter in fees and interest from overdrawn bank fees, credit card fees and consumer loans. When debt is under control, your employees can choose to save and invest their money.
#3 If employees don’t do their timesheets, how will EWA work?
On the contrary, EWA will likely increase your timesheet adherence. Think about it, if you want access to your earned wages, you need to complete your timesheets accurately and on time – they’ll make the extra effort to do it on time and as soon as practically possible.
#4 How does EWA benefit me, the employer?
EWA goes both ways. Staff are more likely to remain with their employer, be more engaged and be more productive on the job. Job seekers are almost two times as likely to accept a 13% lower salary when EWA is an option.
#5 What happens if worked hours are adjusted after accessing some pay?
Assuming the updated worked hours belong to the same (current) pay-period, the accessible balance (ie: the accrued wages) will be updated automatically. An employee cannot draw down their entire balance (it is usually limited to 50-60%), so there is room to move until payday. It can also be adjusted in the following month.
#6 A wage advance doesn’t help people, does it?
Earned Wage Access (EWA) is not an advance (an advance by definition is a loan). EWA simply gives employees access to money that is already theirs. Their work is completed in real-time, so why can’t they get their wages in real-time?
#7 It still sounds like a loan, is that the case?
EWA is NOT a loan. No money is being lent, and no interest is ever charged, nothing is paid back and no credit checks are performed. It simply gives the employee access to wages they have earned, but have not yet been paid for. No part of the pay packet changes, and there are no tax implications for either party.
#8 What’s financial wellbeing, and why is EWA so important?
Financial wellbeing can be defined as ‘the extent to which someone is able to meet all their commitments and needs comfortably, today and in the future.’ EWA plays an essential role in enabling employees to meet their commitments by matching the timing of income and expenses while preventing harmful reliances on future-damaging credit.
If your company wants to empower its employees to tackle the challenges of a monthly paycheck by providing EWA, contact Paytime today to arrange a free consultation.