A growing number of Australians are jumping into earned wage access, an employer-offered benefit that’s already popular in the UK and USA.
Earned Wage Access allows employees to access a portion of their earned salary as they need it – as opposed to having to wait until payday.
“Up until now if Australians have needed extra money for an unexpected expense the only solutions they’ve had are payday loans, buy now pay later options or credit cards – and they are all putting people into debt,” says Steven Furman, CEO of Earned Wage Access provider Paytime.
“We’re being inundated with requests from employees who want to be able to access their pay, but it’s been harder getting that message through to Australian companies who seem reluctant to invest in their staff’s financial wellbeing”, says Mr Furman.
Independent Research commissioned by Paytime shows 81% of Australians would like to be able to access their earned pay before payday.
“Payrolls were introduced monthly or fortnightly due to software limitations and the expense involved in processing them frequently. But times have changed – the way we live our lives have changed. Why should our employer hold our pay for a week, a fortnight or a month?”
What is EWA?
Earned wage access or ‘On-demand Pay’ is when employees can access their wages as they earn it. Most providers will allow access to 50%+ of a workers earned wages.
It’s an employer-offered incentive with the technology plugging into existing payroll software. Employees can access their earned pay via an app – the money instantly transferred into their bank account. Because it’s money they’ve already earned there’s nothing to pay back, its not a loan and there are no credit checks required.
“There’s a bit of confusion here about our product, we are not a pay-in-advance app or a payday loan. We’re actually the opposite as there’s nothing for a person to pay back,” says Mr Furman.
Who uses it?
In the US companies providing earned wage access include Paypal, Walmart, McDonalds, Uber, Hilton, Unilever in fact 80% of Fortune 200 companies now offer EWA.
In the UK, doctors, nurses and health workers are provided EWA under the NHS.
Here in Australia, companies who have jumped on board EWA include Pizza Hut, Hungry Jacks, McGrath Estate Agents, Supabarn supermarkets and Aspen Pharmacare, amongst others.
“Another myth about our product is that it’s only for lower income earners. We have many users on six figure salaries. Some choose to access their wage early to pay down their mortgage faster, others use it to manage cash flow while waiting for company expense reimbursements or others use it to take advantage of investment opportunities,” says Mr Furman.
What does it cost?
There are several models an employer can choose to implement. The first is free for them but it costs staff an ATM style fixed fee every time they wish to withdraw their earned wage. Or an employer may choose to cover this fee themselves and make it free for their staff to make those withdrawals. Or the cost can be shared between both. There’s a range of options to suit each company – but once they’ve made that choice the heavy lifting is done and the solution integrates seamlessly with payroll.
How do I access it?
Earned wage access is an employer-provided benefit so it’s up to companies to introduce it to their staff. However, workers can sign a Paytition (www.paytime.com.au/paytition) asking their employer to introduce it to their workplace.
Will this lead to a cycle of debt?
Unlike credit cards, payday loans or pay in advance apps, there is nothing to pay back with Earned Wage Access. Staff can only access a portion of the wages they’ve already earned. Most earned wage access providers also provide financial tools on the app as well to help their users budget more effectively.
“One thing we can’t change in life is that there are always going to be unexpected expenses crop up no matter how good you are at budgeting,” says Mr Furman.
“Earned Wage Access gives employees access to their own money to pay for these things so they don’t have to borrow it from somewhere else.”
Paytime provides businesses with a free technology platform that allows employees the ability to access a portion of their earned wages at any time during the month. It plugs seamlessly into the company’s payroll and time & attendance software and accesses real-time information. Employees can typically access 50-70% of their earned pay and it is received within minutes into their bank account. Unlike payroll; CRM’s or ERP solutions Paytime does all the heavy lifting when it comes to implementation so that there is very little required from the company’s side, it can be up and running in a few weeks and it runs seamlessly in the background with no need to change payroll. There is also no effect on a company’s cash flow when staff access their pay, as Paytime funds these withdrawals on behalf of the company.