May 8, 2023
4 Common Myths about Earned Wage Access
In a highly personalized, on-demand world, why are employees still waiting for two weeks to receive the money they have earned? Earned Wage Access (EWA) enables employees to get their money before the end of their payroll cycle, sometimes weekly or even daily.
The philosophy behind it is simple: people should have access to their pay as they earn it. However, EWA is relatively new in the employee benefits space, and it can be challenging to pinpoint its value for employees and employers. Here are four common myths regarding EWA that are most important to debunk right now.
Myth 1: EWA is an advance on pay
No. Instead, EWA is a quicker way for employees to access the money they have already earned as they earn it. In fact, employees only get access to what they've already earned and there are no tax implications for employees or employers.
EWA is a modern, flexible way for employees to get their money as they earn it. With earned wage access, their hard-earned money can flow more freely to give them more options, at the speed of their own lives - wherever life takes them.
Myth 2: EWA creates poor money habits
Just the opposite. Providing access to wages as they are earned can significantly improve employees' financial circumstances by giving them greater financial flexibility. The current two-week pay schedule does not coincide with expense and bill due dates, which can cause many employees to experience a cash flow shortfall. This can result in a dangerous reliance on payday loans, overdrafts, and late fees, leading to increased debt.
EWA empowers people to budget more frequently and effectively—reducing their debt faster while managing essential costs such as utilities. Additionally, the money saved from fees and interest could encourage individuals to increase their savings.
Myth 3: There is no benefit of EWA to the employee
On the contrary, EWA is a form of financial freedom that helps an employee’s mental, emotional, and even physical health. When employees gain access to their money as they earn it, they have more short-term liquidity to manage their financial life, improving productivity and retention. For example, employees can access gas money to get to work or a babysitter to watch their kids. This translates to employees consistently showing up for more shifts and reducing their financial anxiety.
In fact, a volatile market and inflation have contributed to the need for employees to get faster, streamlined payments through EWA. It allows employees to:
Pay bills on time without compounding interest Avoid unexpected bank fees and overdraft charges Reduce debt faster Avoid high-interest payday lenders
Myth 4: You can only get EWA through an employer
This is not true. While EWA is often viewed as a service provided through an employer, it can also be accessed directly by the consumer. Employees that take advantage of EWA’s direct-to-consumer model are able to set up an agreement with an EWA provider to get access to their money, even if their employer does not offer this benefit.
Many employers are actually discovering that their employees are already using EWA services, which encourages adoption. Whether a person uses an EWA service through their employer or directly, EWA services are an effective way for employees to access the money they have already earned.
Earned wage access solutions are an essential aspect of benefits that give employees more power over their earnings, helping them maintain financial stability. Payroll-focused company OneSource Virtual, asked employees to rate the importance of the components of their benefits packages and found that 70% of respondents ranked Earned Wage Access as an important benefit. EWA can round out employee benefits packages to make employers more appealing to talent in a competitive market. The trickle-down effect for employers has included a more motivated workforce and increased interest in overtime and extra shifts.
As the “future of work” continues to shift in both expected (digital evolution) and unexpected ways (rapid adoption of remote work post-pandemic), we can expect EWA to appeal to more employees. This is especially true if you consider the varied expectations of a multi-generational workforce. As the current market environment and discourse around company culture and employee well-being continue, EWA will become a “must-have'' rather than a “nice-to-have” benefit.
EarnIn is a financial technology company, not a bank. Bank products are issued by Evolve Bank & Trust, Member FDIC. The EarnIn Card is issued pursuant to a license from Visa USA Inc.
