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What is earned wage access?

Access to income as it is earned can build financial resilience and wellbeing at work.

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Earned wage access is the ability to access money that's been earned as it's earned, ahead of an employee's usual payday. Because waiting 30 days to be paid is essentially employees loaning their employers money, EY estimates that a total of $1tn accrued pay is held in employers’ treasures across OECD countries¹ – and sometimes these loans come at great personal cost.

 

Why are most people paid monthly?

Receiving a weekly wage ceased to be the norm when companies began to pay workers by cheque. This shift in payment schedules was hastened by the introduction of computerised payroll systems designed around monthly salary payments. It made it easier for employers to control cash flow, but harder for employees who were used to budgeting weekly.

At that point in time, the idea of accessing the money in your bank account through a mobile phone would have been ludicrous. In fact, mobile phones were a few decades off. But even though there have been dramatic changes to daily life – like our mobile phones, tap-and-go and subscription payments – there has been little change in the frequency at which we’re paid. Until recently.

How does earned wage access work?

Most earned wage access providers will have a percentage of earned income available, ranging from about 20-50%.

When an employer partners with Wagestream, we integrate with the employer’s payroll and time and attendance systems so employees can track their pay daily and also withdraw a percentage of it when they need to.

If an employee chooses to withdraw money, the money is paid directly into their bank account by Wagestream. Any deductions are then taken into account during payroll reconciliation, before the employee is paid the remainder of their wage on the day their employer pays salaries.

 

Are there fees and/or charges for earned wage access?

Depending on which provider an employer partners with, there may be fees or charges for employers and/or employees. For employees, this can come in the form of:

  • A standard fee for each withdrawal
  • A percentage fee for each withdrawal
  • A membership fee for use of the product.

While the fees may seem small, it's important to make sure they're not adding up and impacting financial wellbeing. Alongside earned wage access, Wagestream provides employees with Learn – actionable tips to help spend, repay debt, save and plan. Having this information readily available can help employees make informed financial decisions and get the most out of their money.

How does earned wage access fit into financial wellbeing?

Broadly, financial wellbeing is about:

By providing a clear picture of what’s being earned and offering the facility to work to a weekly budget, earned wage access helps people keep their spending in check and always have a good understanding of their financial situation.

In terms of debts like credit cards, overdrafts, loans and mortgages, earned wage access offers a way to pay them down faster and reduce the overall amount of interest paid. Earned wage access is also an alternative to having to borrow when hit with an unexpected expense – again reducing interest and avoiding any late fees.

Once all that is done, people have more headspace to make decisions about the future. Earned wage access can be used to make more regular deposits intosavings account so people can build savings faster and reach their goals sooner.

What next?

See more about how Wagestream works.

¹ EY

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