SEP 21, 2023

Earned Wage Access: What Is It & How Does It Work?


Early wage access, sometimes called early pay, allows employees to access part of their paycheck ahead of time. Learn more about how it works.

What is Earned Wage Access?


Financial flexibility and security are crucial aspects of a healthy work-life balance. Waiting until payday to access needed money can be stressful. Earned Wage Access (EWA) is a financial solution that offers employees greater control over their earnings and is gaining popularity among employers and workers alike. With the potential to alleviate financial pressure and improve overall well-being, offering EWA to your employees might be an appreciated perk. Let’s explore what EWA is, how it works, its benefits and downsides, and how to determine if it's the right fit for your employees.



Earned Wage Access is a financial service that allows employees to access earned wages before the usual payday. It works as an alternative to the traditional two-week pay cycle, where employees usually must wait until the end of the pay period to receive their wages. With EWA, employees can access a portion of their already-earned income when they need it, providing them with greater financial flexibility and stability. EWA is typically offered through mobile apps or integrated platforms provided by third-party financial technology companies. These platforms connect to employers' payroll systems and track employees' hours worked and wages earned in real time. Based on this information, employees can request an advance on their earned wages instantly, which is then transferred to their bank account or a dedicated EWA account.


The Benefits of Providing Earned Wage Access to Employees 


1.  Financial Flexibility: One of the most significant advantages of EWA is that it grants employees the ability to access earned wages when they need them the most, enabling them to meet urgent financial needs, such as unexpected expenses or emergencies, without resorting to high-interest loans or credit cards.

2.  Reduced Financial Stress: Living paycheck to paycheck is a reality for many workers, leading to constant financial stress. EWA helps to alleviate this stress by providing employees timely access to their earnings, reducing anxiety about making ends meet.

3.  Improved Employee Satisfaction: By offering EWA, employers demonstrate their commitment to the financial well-being of their workforce. This gesture can boost employee morale, job satisfaction, and overall loyalty to the company.

4.  Lower Employee Turnover: Employees who experience financial stability are more likely to stay with their current employer. By providing EWA, employers can reduce turnover rates and the costs associated with recruiting and training new employees.


5.  No Debt Accumulation: Unlike payday loans or other forms of credit, EWA doesn’t lead to debt accumulation since it allows access to already-earned wages. This financial option can be more sustainable and less likely to put employees in a cycle of debt.


The Downsides of Earned Wage Access 

1.  Transaction Fees: Some EWA providers charge transaction fees or subscription fees to access the service. Although these fees are typically lower than those associated with payday loans, they can still add up, impacting the employees' net pay.

2.  Risk of Overuse: While EWA is designed to offer financial relief, some employees may become overly reliant on this service, which could lead to financial mismanagement and budgeting issues.

3.  Limited Access: The amount available for withdrawal through EWA is usually capped at a certain percentage of the employee's earned wages. This limitation is put in place to prevent abuse of the system but may still restrict access to funds for employees facing larger financial crises.


4.  Employer Participation: Not all employers offer EWA as a benefit, and the availability of the service might be limited in certain industries or regions. Employers are beginning to recognize EWA’s potential benefits in attracting and retaining employees. You can differentiate your business and appeal to current and potential employees by offering the service. Payroll services companies like Payroll Vault can help your business get started. 

Is Earned Wage Access a Loan? 


Employees are accessing their already-earned wages in advance, which means they aren’t borrowing money and aren’t incurring debt. The service operates on the premise of financial earned income management, rather than providing credit. EWA is an advance on a future paycheck, repaid on payday. 


Is EWA Something I Should Consider for My Employees? 


As an employer, determining whether to offer on-demand pay to your employees requires careful consideration of your workforce's needs and their financial situations. Here are some factors to consider:


1.  Employee Demographics: If your employees largely consist of hourly workers or those living paycheck to paycheck, offering EWA could be a valuable financial wellness benefit.

2. Financial Stress: Evaluate whether your employees frequently experience financial stress or seek payroll advances. If so, EWA could help alleviate their concerns.

3.  Alternative Benefits: Assess the existing financial benefits you offer, such as retirement plans or emergency funds. If EWA complements these benefits and enhances your overall employee assistance programs, it may be a good addition.

4.  Vendor Selection: Research various EWA providers to find a reputable company that offers transparent fee structures and excellent customer support.


5.  Company Budget: Consider the cost of implementing EWA, including any fees associated with the service, and ensure it aligns with your budgetary constraints.

Payroll Vault Offers Your Business Payroll Solutions 


If your workforce would benefit from increased financial flexibility and convenience, EWA could be a valuable addition to your employee benefits package. Payroll Vault offers your business the payroll services you need.


By outsourcing to Payroll Vault, we give you back the time you used to spend processing all things payroll so you can focus instead on building your business. We offer all-in-one business administration services, streamlining your operations and keeping your business running smoothly.



Find a location to learn more about Payroll Vault’s payroll solutions for your business today.