Earned wage access (EWA) is a service provided by employers to employees, enabling them to access wages before their next paycheck.
We've all experienced unexpected expenses at some point, and unfortunately, they don't always happen right after payday. Sometimes waiting just isn't an option. Offering EWA is a great way to give your employees more flexibility with their wages and offer a safety net for life's unexpected circumstances.
Typically EWA is offered through a third party that links to an employer's payroll system. When employees request an advance, they'll be notified of any fees and then receive the funds directly in their bank account within a few days, or even sooner for an additional cost. The advanced amount will be deducted from the employee's next paycheck automatically.
Earned wage access is not a loan and doesn't require the hassle of a credit check. Wage advance limits are set by the employer, not by the EWA service.
Why offer earned wage access?
It's good for your employees! EWA takes some stress off and supports financial well-being. Offering this service helps employees feel valued and supported, while boosting morale, engagement, and retention rates. A few other reasons include:
- Attracting talent seeking flexible pay benefits
- Remaining competitive with other companies
- Reducing absenteeism related to financial emergencies
- Decreasing turnover costs related to employee churn
- Supporting employees who live paycheck to paycheck
- Increasing employee loyalty and productivity
How earned wage access works
These are the general steps for EWA:
- Employers partner with an EWA provider. Select a provider that seamlessly integrates with existing payroll systems and is easy for employees to use.
- Employees download an app or register via a web portal with the EWA provider. Employees will need to link their bank account to receive funds via direct deposit.
- Employees request an advance. They'll also need to review and approve any fees before initiating the advance.
- Employees get funds within 1-2 business days. Often they can get funds instantly for an additional fee.
Key considerations for employers
An earned wage access partner should align with your company's goals, values, employee needs, and regulations. Consider the following factors:
- Technology integration. Ensure your payroll provider supports EWA or offers secure API connections to EWA platforms.
- EWA policies and fees. Ensure the fees are not predatory, and make sure the limits align with what you want to offer employees.
- Global variations and compliance. Some countries may regulate or restrict early wage disbursement. Choose an EWA partner that complies with labor laws and tax regulations to avoid penalties.
- Data security. Select providers that adhere to robust encryption and compliance standards (e.g., GDPR, SOC 2) to facilitate the security of employee data.
Benefits vs. drawbacks
Earned wage access provides numerous benefits to both employers and employees. However, employers need to be aware of potential drawbacks before implementing EWA:
| Pros | Cons |
| Improves employee financial health | May increase employer workload or require tech upgrades |
| Enhances talent acquisition and retention | Investment and cash flow issues, depending on how the program is funded and managed |
| Offers employees a low-cost alternative to payday loans | Could raise regulatory or compliance issues in certain regions |
| Increases satisfaction among hourly, gig, or frontline workers | Not all EWA programs are cost-neutral to employers or employees |
| Increases employee productivity | Potential for employee liability if there is a data breach |
Global use of earned wage access
Offering earned wage access is growing in popularity, particularly in the service, retail, food and beverage, and hospitality industries. Employers that pay hourly and offer part-time or seasonal work are among those providing earned wage access benefits.
The U.S. and the U.K. have the highest rates of EWA, especially since the COVID-19 pandemic. European countries, such as Spain and France, are seeing an increase in EWA use due to favorable legislation and growing interest among employers and employees. The expansion of regional and international EWA providers into new markets is increasing earned wage access in Southeast Asia. While it continues to grow, access is limited in most developing nations.
Global companies must take extra precautions when considering earned wage access benefits to ensure compliance and security. Other considerations include:
- Aligning payment timing with local labor laws
- Understanding wage requirements in other regions to assess costs and implementation, especially with a distributed workforce
- Adhering to wage payment provisions
- Offering multilingual, multi-currency support to employees
- Ensuring withholdings and deductions remain accurate
FAQs
Is earned wage access considered a loan?
No. Earned wage access is a non-recourse advance of already-earned wages and does not accrue interest.
Does offering EWA increase payroll complexity?
It can.. Using an integrated payroll or EOR partner can help streamline the process.
How do global employers manage EWA across different countries?
The best way is to partner with EWA providers who account for global variations and local regulations, and combine that with an EOR solution that streamlines implementation and management.
Who pays the transaction fees for EWA?
Employees typically pay for transaction fees, but some employers cover fees as an additional benefit to their employees.
Pebl is your global payroll partner
Payroll. It always comes back to payroll, doesn't it? Between tax laws, local regulations, currency exchange, legacy payroll systems (we see you, people still just using Excel), and the myriad of offerings such as EWA, it's little wonder that payroll takes up a massive amount of HR bandwidth.
When you partner with Pebl, whether through our Employer of Record service or by utilizing our Global Work Platform™, we handle onboarding, payroll, benefits, and of course, EWA. We make sure your talent gets what they deserve (the best) with country-specific benefits packages and wages that are updated in real-time to stay competitive. Contact us today to learn more.
Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided "as is," and no representations are made that the content is error-free.
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