Veena
Last Updated on July 19, 2024 by Team Experts
The modern age has brought many innovations in how we receive our wages. From landmark bills like the Paycheck Fairness Act to crypto-wages, one of the newest innovations we know is earned wage access. This system allows employees to get their paycheck as soon as they earn it, which can be helpful for many workers.
You’ll find many benefits to earned wage access, but what is it? How does it work? How does it make your business better? Here’s everything you need to know.
What Is Earned Wage Access?
Earned wage access has several descriptions, depending on how you want to look at it. In simple terms, earned wage access allows employees to access their wages as soon as they earn them. Known as “on-demand pay” or “instant pay,” employees can access their money before payday.
For example, if an employee receives $1500 bi-weekly and has already worked a whole week, they can access as much as $750 of their salary before their designated payday. Whatever value they get will then be deducted from their payday wages.
Earned wage access is officially known as the Employer Salary Access Scheme (ESAS). The scheme came out of employee frustrations with payroll, which typically rolls every 30 days or a month. As many hourly employees prefer to get their wages as early as possible, this process should be helpful for them.
How Does An Employer Salary Access Scheme Work?
With ESA, employers are in charge of their wages, with immediate access to the funds they need. When it’s time to give their employees their funds, they can choose to do it manually, or they can allow instant crediting. When the former option is selected, the employer must release the funds themselves.
An employer can draw the line however they like, but typically, they will only provide early release of funds for salaried or contract-based (dependent) contracts. Other employees who usually work by the hour, like assembly line laborers, can get their salaries at the end of the week.
With increased flexibility, you, as an employee, can have more control over your spending. You no longer have to budget your money around your next scheduled payment. Instead, you can access your earned income when you need it.
Benefits of Earned Wage Access
Many benefits come with EWA, the best of which allows you to be flexible with how you distribute your paychecks.
For one, you can process employee payments to release daily, weekly, fortnightly, or monthly payments. This means your employees will be able to get their money faster, which is one of the main reasons for offering such programs in the first place.
Companies can also offer bonuses and commissions through this method. Employees can enjoy a more flexible lifestyle because they can receive the money they worked hard for. As bills don’t wait regardless if you get your salary next week or tomorrow, earned wage access lets employees use the money they worked for as soon as possible.
With increased flexibility, you’ll have more control over your spending. You no longer have to budget your money around your next scheduled payment. Instead, you can access your earned income when you need it.
For businesses, there are many advantages to using this program. Integrating your financial system through good software streamlines your processes and makes it much easier to manage finances.
As a business owner, you’ll know that giving your staff more options will increase their loyalty to your company. Giving your employees access to their paychecks will boost their productivity by making them feel more valued. When they know you care about their well-being and financial standing, they are more likely to work hard and stay loyal to you.
Who Should Use This Service?
This program is ideal for companies of any size, especially those that employ a large contingent of part-time or independent contracting staff. The more flexibility you can offer your team members, the better it is for everyone.
Many businesses have traditionally relied on banks to facilitate their HR and accounting processes. However, this is no longer the most efficient way to do things. Your bank doesn’t have insight into your day-to-day activities.
When handling your compensation, giving all staff members access to it can be beneficial. Applying an EWA can add flexibility to your system and make it easier for your people to get what they need.
How To Create An Early Wage Access Policy?
If you’re ready to introduce this to your system, you may wonder how to make the whole thing run smoothly. Starting an on-demand wage policy is easier than it may sound. It has its complications and things to set up before you can get an EWA running.
First, consider the software that you want to use. See what kind of costs this will incur for your business, assuming it neither generates profit nor creates measurable benefits. Also, consider how broad the system applies, which usually only works for full-time employees, not contractors.
To determine who should receive this benefit, you’ll also need to establish how they’ll access it. If you’re automating your payouts, you would need to provide not only user accounts for the system but a web portal and education for your employees.
You’ll also want to consider how large each payout will be. Most companies provide a hard cap on how much employees can pull out before payday. Some also only allow cash pulled out if the employee has enough minimum registered work time with the company.
Finally, you should give your employees a heads up about your program. Tell them about a few implementation guidelines and how they can check their balance. Assure them that your EWA policy will cover any transactions they make.
While the concept of earned wage access is simple enough, it can be challenging to implement. Not only that, many companies are wary about allowing staff access to their wages this early. Creating a policy should be a priority for your company, as it sets expectations and helps employees understand what is acceptable.
The Bottom Line
New innovations like earned wage access change business for everyone involved. While this may be confusing initially, keep in mind that this allows your employees to enjoy the benefits of increased flexibility.
An EWA policy can increase efficiency for your company and benefit your employees. Your business will be more successful by giving your staff the independence they want.
