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Earned Wage Access (EWA), also known as on-demand pay, is revolutionising the traditional payroll system by allowing employees to access their earned wages before the standard payday fixed by the companies. The need for financial flexibility and immediate access to funds are making this futuristic approach popular. According to the Market Statsville Group1 (MSG), the global on-demand pay platform market size is expected to grow at a CAGR of 14.9% in next 10 years. The range of its benefits cover both employees and employers.
What is Earned Wage Access?
Traditional pay cycles typically occur bi-weekly or monthly. The employees halt on their needs or take debt till the salary credited message hits the phone. The high loan interest, or overdue payments can be defeated with EWA. The concept of EWA is not new, some companies have offered EWA for more than a decade now. However, it used to be conducted manually. With current technology and endless possibilities, the EWA has resurfaced again with a modern outlook. The one-click-access to the earned wage let the employees improve their financial stability and manage unforeseen expenses. Most EWA programs are managed by restricted transaction limit and the withdrawal may cost little to no fee.
Although EWA is a game changer, it is not here to replace the traditional monthly payroll process, rather it works as an add-on to offer employees financial flexibility.
Advantages of EWA for Employees
‘PYMNTS Credit Card Use Deep Dive Edition of The Paycheck-To-Paycheck Report’ shows that 57% share of credit cards in the U.S. are held by paycheck-to-paycheck consumers. Under such circumstances employees are eager to welcome on demand pay to have a better grip over their financial needs. EWA offers employees easy access to their wages. EWA enables employees to avoid high-interest payday loans and late fees.
EWA tail off the financial stress and it shows employees the organisation is committed to employee well-being. It is directly connected to the increased focus on job and job satisfaction.
EWA is gaining popularity among young professionals and students who pay for their own tuition.
Pymnts’survey,‘Visa Direct powers real-time payroll for frontline workers, May 14, 2020’ found out “89% of the surveyed workers would be willing to work longer for an employer who offered EWA while 79% of them are more willing to switch to employers already offering EWA”.
Advantages of EWA for Employers
As we continue the trail of thoughts the financially secure employees are more productive at work and loyal to the organisation. Having the EWA as an added benefit will be a distinguishing factor in a competitive labour market. Retaining top talents gets easier with on-demand pay. A study by ADP shows that having EWA as benefit filled the open positions 52% faster than usual.
The potential of EWA is high and as a result, several governments are incentivising the companies to welcome EWA to retain employees and at the same time maintaining the country’s employment rate. Another ADP study on EWA states that 96% of employers offering find that their employees like this additional benefit. That same study finds 96% of the survey taker revealed it helps with talent attraction, and 93% of them mentioned it helps with employee retention. Companies like Wal-Mart offer EWA in a list of benefits to attract applicants and retaining them during a worker shortage. Apart from this, companies like McDonalds, Target and Uber also use this low-cost attraction tool to content the workers and generate positive impression among the workers.
EWA grew rapidly in USA and became a mainstream perk for a time being now; the Middle East, Africa and APAC is also catching the trend. Even though the specific statistics are scarce, the employers in these regions are addressing the value of EWA and embracing it gradually. As a result, local service providers are proliferating.
Challenges of EWA
If EWA is outstanding and offers so many advantages, why hasn’t it become a standard yet? Well, there are many challenges involved as well. On-demand pay platforms work by integrating with a company’s existing payroll software. The first step of integration can induce expenses and maintenance of EWA can cost money to both employees and employers. So, an organisation needs to be careful during choosing their service provider to make sure the attached charges do not consume a significant amount from the employee’s salary as that will create an unpleasant impression on the employee.
It will also require the compliance with labour laws and regulations. Differing regulations across different states is one of its most prominent challenges. In US, few states have rules that limit employers’ ability to deduct fees from employees’ wages. So, the same service process cannot navigate complex and often contradicting regulations. The similar problem of ensuring compliance across different regions is an issue in the Middle East as well as Asia Pacific but with professional help it can be steered smoothly.
Another concern in the EWA service is privacy of employees’ sensitive financial data. We are surrounded by cyber threats, therefore, choosing a provider with bank-grade security should be the most important step of the integration process.
On-demand pay is growing continuously and deemed to have standard utility. This technology can be beneficial to both employers and employees, as it allows for faster access to funds, but the EWA service providers and companies need to collaborate with local legislators to clarify regulations and ensure that they are able to offer their services with the guarantee of compliance.
EWA Adoption Across Sectors and Enterprises
EWA naturally aligns with the gig work culture and freelancing. Even though implementation costs were a concern for smaller companies, the rise of several service providers have made it more accessible to Small & Medium Enterprises. They see it as one of the tools to compete with large enterprises who often are reluctant to adopt EWA due to their strict policies and complexities of implementation.
The leading sectors in EWA adoption are restaurant and hospitality, healthcare, and manufacturing. According to an estimation by hr.com, in the United States alone, the prevalence of companies offering EWA has surged from 5% in 2021 to 20% in 2023. Even developing nations such as India and Vietnam, has started to adopt EWA services to reshape the workers connection with their earned wages. According to Chitresh Sharma, the co-founder of India’s first earned wage access platform Refyne, “more than 150 firms — including Practo, TeamLease, Tenon, Shadowfax, Rebel Foods, Acko, BlackBuck, Arti Group and Cafe Coffee Day have enabled the EWA service for their over 700,000 employees”.
Conclusion
Although the integration and impact differ globally, EWA is set to become the new standard in the world of payroll. Even with all its challenges EWA is emerging as a global trend that no business can ignore. The world becomes employer’s oyster with EWA as it opens the door to global talent pool and increase the employee retention rate. Its adoption rate across different countries mirrors the increasing recognition of the need for employees having control over their finances which will lead to more engaged and productive workforce. EWA suits the modern workforce’s expectations and thereby foster the wellness of employees worldwide.
