Waiting for payday can be an inconvenience. Something could happen, demanding unexpected expenses immediately– hospital bills, car repair, or school expenses. Research shows that 44% of employees have less than Ksh. 50,000 saved to cater for unexpected expenses, so savings are often out of the question.

In addition, going for short or long-term loans can prove costly to struggling employees. Therefore, more employees want to access their earned income sooner to make ends meet. Luckily, more companies recognize the need to pay employees more frequently.

Some organizations offer ways for employees to access their wages when they need it most. One of the popular ways employees can do so is through Earned Wage Access or EWA. Learn more about the concept below.

What is Earned Wage Access?

Earned wage access is a payroll scheme that allows employees to access their wages or income as soon as they earn them. Employees can get their earnings ahead of their usual payday. That is why EWA is often described as ‘on-demand pay’ or ‘instant pay.’ The concept originated from the USA and UK but now has global traction for its practicality.

EWA is a way for employees to get relief from financial stress. But it is more than just beneficial to the employee as employers benefit from employee satisfaction, translating to better retention rates.

Many confuse EWA with payday loans and other forms of borrowing. However, they are not loans since employees are accessing the money they have already earned for working. On the other hand, a payday loan is a short-term borrowing scheme where the lender extends high-interest credit based on an employee’s income.

How Does Earned Wage Access Work?

Employers must register with an EWA provider to give employees access to this payroll process. EWA providers have technologies that employers can integrate with existing payroll systems.

Employees, on the other hand, will receive access to the platform through apps or software. From here, employees can monitor their earnings and even link to their bank accounts or debit cards for direct deposit.

Most earned wage access providers set a percentage of earned income available based on the employer’s guidance. It often lies between 20% and 50%. In addition, the systems limit the amount an employee can request per day or week.

When an employee withdraws money, it is paid directly to their bank account or debit card in one or two business days. The payroll provider then allows for taxes and deductions before paying the employee the remainder of their wages on payday.

Are There Charges or Fees For EWA?

Depending on the EWA provider, there may be charges for employees or employers. Employees often find themselves paying the fee in the form of:

●  A percentage fee for each withdrawal.

●  A membership fee for using the platform.

●  A standard fee for each withdrawal.

Whichever the case, the app or software will tell the employee how much they will receive after deducting transfer fees.

While the fee is small and often considered ATM-like, ensuring it does not add up enough to affect financial wellness is important.

Practical example:

An employee earns Ksh.15,000 biweekly, with the coming Friday as the payday. On Monday, the employee discovers an unexpected medical treatment that savings cannot cover. So, the employee uses the EWA platform to access a maximum of 30% of their income to cover the cost. If the standard transfer fee is Ksh.10, the employee will receive Ksh.4,490.

Earned Wage Access Vs. Salary Advance

The main difference between EWA and salary advance is that EWA allows employees to access a portion of their earned wages at any time, while salary advance is typically offered as an advance on the next paycheck. Salary advances are only provided by employers, while the organization's payroll providers provide EWA. EWA can be a more flexible and cost-effective option for employees who need to access their earned wages early.

Eligibility Requirements For Earned Wage Access

Earned wage access programs often require employees to meet certain requirements to access the services. The requirements include the following:

●  Working for an organization that offers earned wage access.

●  An active bank account or debit card for depositing funds.

●  Activated direct deposit.

●  A set payday.

●  Proof of earnings such as hours worked.

●  Access to the EWA provider’s app or software.

Employer and Employee Benefits Of Earned Wage Access

To Employees

●  Better preparation for emergency expenses. As the pandemic proved, anything can happen at any time. Companies offering EWA benefits allow them to better prepare for emergency expenses. It is one of the ways employers can support their workforce in times of need.

●  Save money from predatory lenders. Employees who wind up with no money before payday turn to other sources of income– often loans. However, the high-interest rates can be difficult to repay, leading to months and sometimes years of debt. All this is preventable with EWA programs. 

●  Better focus at work. 68% of employees feel that personal financial issues are impacting their health and, in turn, productivity. Not having to worry about financial well-being in the case of an emergency can help with an employee’s productivity. They will be able to focus on daily tasks better.

●  Loyalty to the company. Support during tough situations can elevate an employee's view of the company. The simple but beneficial feature can improve employees' loyalty.

●  Better budgeting and saving habits. Through EWA programs, employees can develop better saving habits and even budget their money better. 

To Employers

●  Good retention rates. EWA programs can improve employee satisfaction. It often translates to company loyalty, thus, higher retention rates.

●  Attracting top talent. 95% of all employees would be interested in working for employers who provide EWA. Therefore, offering this benefit could be the perk that gives employers an edge in competing for top talent.

●  Better bottom line. Better productivity means a great bottom line for the company.

Simple, Effective, and Accurate EWA

Employers looking for an EWA provider can use Workpay for accurate, effective, and simple EWA services. The convenient service is free for up to ksh.3000 with a 3% access fee for any amount above. Get in touch today to learn how any day can be payday with Workpay Earn Wage Access.