Earned wage access or EWA, is when employees can receive part of their already earned wages before payday. EWA is also called early pay, instant pay, or on-demand pay. Many companies such as Amazon, Walmart, and McDonalds offer EWA for their hourly workers.
How does earned wage access work?
Employers can follow a few steps to provide earned wage access for employees. Here’s what the process looks like:
- Download the app and link to a bank account: Companies will pair with an EWA app that requires the finance team to link to a bank account or debit card where it can deposit the money. This app is usually linked to the employer’s payroll solution and can show many employees earned from their paycheck at the end of each shift.
- Employees ask for part of their paycheck: Apps may limit the amount employees can request each day or during a pay period. Employers may also set limits, such as half of the employee’s paycheck.
- Employees agree to the terms and potential fees: When employees request an advance, the app will report how much the employee can receive and when, and alert them to any transfer fees. If the employee agrees, the funds are deposited into their account within 1-2 business days. Fees can be subtracted from the advance before it’s deposited or subtracted from repayment.
- Employees receive their remaining pay on payday. On the next payday, employees will receive their paycheck, minus their advance.
Is earned wage access a loan?
In short, earned wage access is not a loan. It is income earned for every hour an employee has already worked. Employees can access some of their wages early and receive the remaining amount (minus any fees that come with the EWA) on payday.
Does earned wage access impact how employers process payroll?
When an employee requests earned wages, it does not impact regular payroll operations. Finance or payroll teams do not need to change how they process payroll and can continue to run payroll as usual with the same withholding, pay statements, and so on.
Why would companies offer earned wage access?
Allowing employees early access to their wages can improve their quality of life by covering unexpected expenses, avoiding overdraft fees, and so on. Without this extra stress, employees may feel happier, more productive and motivated in the workplace, which can directly impact a company’s efforts to achieve its goals.