Earned Wage Access – what is it?

Earned Wage Access (EWA) is a way for employees to access their wages as soon as they earn them, and for employers to improve their workers wellbeing and attract or retain the best talent.

EWA usually forces the employee to pay a fee of around £2 to withdraw their wages before the traditional ‘payday’. Unlike many other services, Earned Wage Access from Income Group is free for employees and brings a positive ROI for employers.

Earned Wage Access – what is it?

Earned Wage Access is a financial service offered to employees allowing them to access a percentage of their accrued wages before the end of the current payroll cycle. It usually requires the employees to pay a small fee each time they access their earnings. Earned Wage Access from Income Group is free for employees, as employers absorb it as a cost of employment, with a positive return on investment.

Other names for Earned Wage Access

EWA is also known as instant pay, earned income access, wage advance, early wage access, accrued wage access, salary advance, and on-demand pay.

How does Earned Wage Access work?

Most people don’t want to wait until payday to get their earnings. From paying bills, navigating childcare costs to sending money to family overseas and funding unexpected expenses — flexible access to money matters.

Employers sign up to an Earned Wage Access provider which links through to their existing payroll system. Then, by leveraging specific technology applications, employees can log in to their account via an app and withdraw a percentage of their salary before pay day.

Earned Wage Access providers

Having initially gained popularity in the US, there are more EWA providers in North America than in Europe. In the UK, Earned Wage Access is increasing in popularity as employers and employees become more aware of the benefits. Income Group offers the only Earned Wage Access service from an authorised payments institution. Other providers – with many charging the employees – include Ceridian Dayforce, Cloudpay, Payflow, Salary Finance, Salarify and Wagestream.

What is the Earned Wage Access business model

Many Earned Wage Access providers follow one of the following business models.

  1. charge the employer a flat fee and no cost to employees.
  2. charge the employees a fee per transaction.
  3. charge both the employer and employee

How do Earned Wage Access providers make money?

Earned Wage Access providers make money by charging employees or employers to use their services.

This fee may be charged in one of several ways, including a percentage of wages accessed, a flat fee per transaction, or a combination of both. Some providers may also charge additional fees for certain services, such as additional features or account maintenance.

Is Earned Wage Access getting more popular?

Yes, Earned Wage Access is becoming increasingly popular.

In the USA

The number of  Earned Wage Access providers in the US & UK has grown significantly in recent years as employers recognise the financial benefits of offering employees access to their wages in real-time. Additionally, US states including New York and California have passed laws allowing for EWA programmes, adding to its popularity.

Speaking to Tech Crunch, Jennifer Ho, partner at Integra Partners, expressed confidence that the US EWA industry is going to keep growing after positive early interest.

She said: “In 2021, over $1.13 billion was raised by start-ups offering EWA products. Due to changing lifestyles, rising costs of living and the residual impact of COVID-19, many small and medium-sized enterprises have grown dependent on EWA”.

Companies using EWA show increased results in employee retention and engagement, whilst also helping to attract new talent into the workforce.

In 2022, a US study found that 79 percent of working Americans would be more interested in applying for a job that pays them the same day they work. 30 percent higher than in 2018.

More than half (56 percent) of working Americans would stay a month to over a year longer at a job if they could get immediate access to their earned pay after each day’s work at no cost.

In the UK

In the UK, the Financial Conduct Authority (FCA) has recently been considering the introduction of Earned Wage Access. The UK government has launched a consultation on the potential introduction of an Earned Wage Access framework. Interest in Earned Wage Access has been growing in the UK and it is expected to become more popular in the coming years.

 Earned Wage Access

Is Earned Wage Access a payday loan?

Earned Wage Access is not a payday loan. Some critics argue that when used improperly, employer salary advance schemes can drive users into cycles of debt, like payday loans can. They have also said it should be regulated in the same manner as much-criticised payday lenders. Income Group is proud to be the only Earned Wage Access service from an authorised payments institution.

In contrast, reports have shown that 72% of those using Earned Wage Access feel more in control of their finances. Almost two-thirds say it improves their quality of life.

Earned Wage Access is also proven to help people avoid cycles of debt and credit reliance. Reducing payday loan use by 88%, credit card use by 39% and overdraft use by 31%.

What are the benefits of Earned Wage Access?

Access to Earned Wages:

Earned Wage Access gives employees the ability to access their earned wages any time, instead of waiting for payday. This can help employees better manage their finances and avoid debt.

Improved financial health:

By having access to earned wages, employees can better manage their finances and budgeting. This helps them reduce the stress of making it to payday and having enough money to cover their expenses.

Increased employee retention:

Access to earned wages can also help employers retain their employees. They are able to access their money when they need it. This can help employers retain their best talent and avoid the costs associated with recruiting and onboarding new employees.

Increased productivity:

When employees have access to their earned wages, they are able to better manage their finances and budget. This means improved productivity and job satisfaction. It can also have a positive impact on the overall performance of the company.

Income Group & EWA

Over 90% of employers said Earned Wage Access helps them attract and retain talent, and 96% of employers who offer Earned Wage Access said their employees like it!

Income Group enables Companies to offer employees to draw-down their wages on demand, in real-time. Rules and limits are configured to make sure employees liquidity is safeguarded and the system isn’t abused. IG’s product is cloud-native and extremely easy to implement. Within 24hrs we can migrate a Company’s payroll payments to our platform and start the use of ODP.

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