Everyone needs money to live, buy food, pay bills, and sometimes even treat themselves. Employees who need more income face financial stress and may seek out second jobs or predatory payday loans.
Employers can help employees by providing earned wage access (EWA). Also known as on-demand pay, this employee benefit allows workers to receive wages before their employer-designated payday.
What are Earned Wages?
Everyone needs money to pay their bills, buy food and other essentials, and have fun. But waiting for your paycheck to arrive in the bank is often a hassle. Earned Wage Access (EWA) is a new way for employees to get the cash they need before their employer-designated payday.
Also known as on-demand pay or instant pay, EWA is a tool that allows hourly and salaried employees to have a direct, easy-to-use link to wages they’ve already earned. Employees can use an app or other technology to request their earned wages before their scheduled payroll deposit date and then choose how they want the funds delivered — directly into their bank account or onto a prepaid card.
There are many different providers of EWA, but the most popular are mobile app-based platforms offering various features. Most allow employees to manage their accounts through the app, with features like requesting wage advances and setting budgeting goals. They can even set up notifications that alert them when they have a payment due.
Many employers are implementing EWA as a competitive benefit to attract and retain hourly workers. It can help reduce absenteeism and productivity issues while eliminating the stress of living paycheck-to-paycheck. Plus, it can cut costs for the company by lowering costly credit card and other debt-related fees.
What is the Difference Between Earned Wages and Wages?
Wages are the amount of money that an employee receives for their work. Generally, wages are paid weekly, bi-weekly, or semimonthly depending on the employer and payroll system. Wages may be a combination of Salary, tips, or other earnings such as shift differential, overtime, or premium pay. Some workers also earn a daily allowance for expenses such as meals, drinks, phone, or utilities.
Earned wage access, or on-demand pay as it’s sometimes known, is a new payroll technology revolutionizing employee pay. The program allows employees to withdraw a portion of their wages before their scheduled payday. This can be especially helpful for hourly workers who face unexpected financial emergencies like car repairs or medical bills. It can also help them avoid costly overdraft fees and credit card debt.
Unlike paycheck loans or advance options, earned wage access (EWA) is not a form of credit and does not charge interest charges or hidden fees. Instead, the withdrawn money is deducted from the employee’s next paycheck. The EWA program also helps employees build savings habits by making saving a little bit each month more manageable.
As the business world evolves, HR teams seek innovative ways to improve their financial wellness. The benefits of implementing an EWA program are significant and include improved morale, decreased turnover, and even more excellent financial stability.
What is the Difference Between Wages and Salary?
Wages and Salary are two types of pay an employee may receive in exchange for their work. While Salary is a set amount that doesn’t change over time, wages can vary weekly or monthly based on performance. Understanding the difference between wage and Salary is essential when deciding what type of job to look for.
As more employers adopt Earned Wage Access, it is essential to understand how it works and the impact it can have on your employees’ financial wellness. Allowing employees to spend money they’ve already earned can help them avoid overdraft fees, credit card interest rates, and other costly consequences of misaligning expenses with paydays.
In addition, having immediate access to their earned wages can help employees meet daily needs such as food, transportation, and basic housing. Providing employees with the means to meet their financial goals can help them improve their quality of life and increase employee satisfaction, retention, and overall engagement.
Rolling out a program like this will require some upfront planning. Start by assessing your current payroll process and how it compares to other options available. You will also need to consider the impact this will have on your employees’ lives, including what it will mean for their ability to manage their bills and expenses between paydays.
What is the Difference Between Salary and Benefits?
The gig economy has helped fuel interest in faster payment methods like earned wage access (EWA). Often known as “on-demand pay” or same-day payday, EWA allows workers to use their wages early instead of waiting for bi-weekly or monthly paychecks.
This is especially beneficial for hourly employees who struggle to balance finances and deal with unexpected expenses before their next paycheck. It can prevent them from incurring overdraft fees or spiraling into debt while also reducing stress and improving overall financial wellness.
To offer EWA, employers work with a financial technology provider to set up the system and integrate it with their payroll software. Employees can access their net wages through the app before their regular payday. The app deducts any taxes or other payroll deductions and makes the remaining funds available to employees.
EWA offers several benefits for employees and businesses alike, including lower absenteeism and improved productivity in the workplace. Employees cannot worry about financial stress and can focus on their job. In addition, it can help them get out of cycles of predatory payday loans and credit card debt. Plus, it helps them avoid putting off essential bills or services. Many employees find it easier to budget their money with EWA, which can lead to a more stable and secure financial future.