A feature that has started to appear in job adverts is the offer of salary advance and earned wage access. Companies are beginning to move into the 21st century and provide employees with more ways to access their pay.
There is no longer a one size fits all way of receiving your wages. Employees have different needs and spending patterns; because of that, fintech companies are growing in popularity and helping businesses provide more options to employees. In comes salary advance schemes.
What is salary advance?
Traditionally, a salary advance is when an employee borrows their wages early from their employers.
Employees receive a loan from their employer to cover the required costs. This means the employee is now at risk of failing to pay back the loan because they haven’t yet earned the salary.
A more modern salary advance, also known as earned wage access, allows employees to withdraw a portion of their earned wages before payday as their accrued wage is already calculated.
More and more companies are signing up for these schemes to give employees early access to their salary and not have to wait until the end of the month to get paid.
Salary advances can be helpful for employees who need access to funds quickly to cover unexpected expenses or in the current cost of living crisis, make ends meet.
How does salary advance work?
Salary advances and earned wage access are financial services that allow employees to access a portion of their earned wages before their regular payday.
These services work by employers signing up to a salary advance provider. Employees will then have access to an app or online portal which will show them how much of their earned wage they have available. The employee can then decide how much of their wage they would like to withdraw.
Once the employee decides on how much of their earned wage they would like to withdraw, they submit a request and typically, the salary advance company pays the employee the money.
After their salary advance has been paid, the earned wage access provider will add a fee to the employee’s account for the withdrawal. By the time it comes to the employee’s regular payday, the employer will pay the salary advance company what the employee withdrew plus the additional fee from their wages and then whatever is left will be paid into the employee’s account as usual.
What are the benefits of salary advance?
There are many reasons why employers should consider registering with a salary advance provider. These providers offer employees access to funds that they might not otherwise have, allowing them to pay for urgent expenses or to make ends meet during a difficult financial period.
In giving employees this opportunity to pay for necessities, salary advance providers can improve employee wellbeing. Allowing early access to wages could help to reduce stress and financial strain for employees, which could in turn improve their overall productivity.
Although a salary advance is a short-term loan, there is no chance for employees to not repay what they owe as it comes straight out of their wages, and they cannot withdraw more than they have earned. Because of this, salary advances and earned wage access are not classed as credit and employees would not have to pay interest.
Salary advance for your business
If you’re considering giving your employees the opportunity to start using salary advances, earned wage access, or on-demand pay there are a lot of providers available.
IGsend from Income Group enables salary payments to be paid instantly or on demand, to employees.
If you would like more information on how Income Group can improve your payroll process, feel free to contact us or book a free ten-minute demo with our team.