What is Earned Wage Access?

Blog | July 12, 2022 | 5 minutes read

Earned Wage Access “allows employees to safely draw some or all of their earned wages before payday” according to the Financial Health Network. This is also known as EWA or on-demand pay.

Payactiv invented Earned Wage Access in 2012 and our platform makes it possible for employers to offer their employees access to their earned but unpaid wages between paychecks by integrating with the HR systems they already use and making the employees’ wages available from a mobile app. Employees can access their earned wages when they need them and transfer them to their card or bank account to make payments, pick up as cash from Walmart, or use directly for Uber, Amazon, or to pay bills from the app.

EWA platforms aim to provide a meaningful solution to payday loans and overdrafts, while ultimately aiding in the reduction of employee financial stress to boost engagement, productivity, and retention.

US workers made around 56 million EWA transactions amounting to $9.5 billion in 2020

What Are the Benefits of Earned Wage Access?

60%

of employers recognize that offering programs such as EWA can be a low-cost solution to attract and retain employees, as well as generate goodwill among their workforces.
Source: KPMG Advisory, 2021

56%

of employees who had access to their earned wages indicated that they used the benefit.
Source: Finhealthnetwork.org, 2019

In theory, EWA products can have similar use cases as short-term liquidity products, such as small-dollar credit, helping individuals overcome problems with misaligned cash flow and providing a way to cover an emergency expense. However, despite the increasing popularity of EWA products, there is not yet enough evidence to determine their impact on employees’ financial health. (https://finhealthnetwork.org/research/know-your-borrower-the-four-need-cases-of-small-dollar-credit-consumers/) Financial Health Network research has found that most EWA product users access the product consecutively over varying periods of time, and that the employee’s cost to use the product can vary based on the company’s fee model and individual usage patterns. (https://finhealthnetwork.org/research/earned-wage-access-and-direct-to-consumer-advance-usage-trends/)

Employers offering EWA should make sure that their employees understand the service and continue to modify it based on its impact on their employees’ financial wellness. In addition to EWA, businesses should also offer a suite of financial resources to help employees’ financial literacy and health. Lastly, it is important for businesses to minimize any employee fees related to EWA.

In a survey study by Visa in 2019, it reports that 95% of workers would be interested in working at companies that provide EWA (Visa, 2019).

With 7 in 10 workers who quit a job in the last year claiming access to earned wages would make them more likely to stay, it’s clear Earned Wage Access has become a key element in employee benefits packages everywhere. (https://www.payactiv.com/resources/5-myths-around-earned-wage-benefits-and-the-real-facts/)

How Do Earned Wage Access Products Work?

Funding Access to Wages

Employees’ access to wages are usually funded through the EWA vendor – typically through capital on their balance sheet or use of a debt facility. Vendors use a payroll integration (if they do not already manage payroll) or secure timesheet data to verify the earnings that can be accessed through a user-facing application.

Disbursement

Employees can receive access to their wages in one of several ways: funds are sent to an employees’ linked direct deposit account through their employer, to a bank account the employee has set up with the EWA vendor, or to a prepaid or payroll card. Most EWA companies allow users to access 50%-100% of earned wages at a given time. Rules around accesses per pay period or per month and ability to take consecutive accesses vary by provider and by employer.

Payment to EWA Vendor

Wages accessed prior to payday are typically recouped from the users’ very next paycheck, usually meaning a repayment period of less than two weeks. EWA providers have at least a 97% recoupment rate; for those who may have difficulty repaying, some offer referrals to local resources to provide support.

Timing of Payments

Accesses are sent to an employee’s external bank account via direct deposit typically the next business day. Transfers to externally linked debit or prepaid cards can take up to 48 hours. Transfers can be made instant for a $1-$5 fee, depending on the vendor. Conversely, transfers can be instant and often are free for bank accounts or cards offered by EWA vendors.

Source: https://finhealthnetwork.org/research/workplace-financial-health-innovation-rolling-out-an-earned-wage-access-program-for-your-employees/#:~:text=Funding%20Access%20to%20Wages,use%20of%20a%20debt%20facility

Earned Wage Access: The Key Players

	Payactiv	DailyPay	Branch	Even
EWA Pricing	Free with DD on PA card $1/day, +$1.99 instant *Fees capped at $3 for 1 week or $5 for 2 weeks	$1.99 / 2-3 days Transfer, $2.99 For Instant Transfer	Free with 3 days standard delivery $2.99 for EWAs under $25 $3.99-$4.99 for EWAs $26-$75	$8/mo membership fee, can be subsidized by employer
Access limit	Customizable by employer, up to 90% net income	up to 100%	up to 50%	up to 50%
Bank transfer	Yes	Yes	Yes	Yes
Amazon	Yes	No	No	No
Uber	Yes	No	No	No
Walmart cash	Yes, $1.99/ txn	No	No	Yes
Auto-pay	Yes	No	No	No
Card	Prepaid, Payroll	No	Debit	No
P2P payments	Yes	No	Yes	No
Bill pay	Yes	No	Yes	Yes
Savings Tools	Goal-based Savings and SmartSave	Yes	No	Yes
Budgeting	SmartSpend	No	Yes	Yes
Financial counseling	Free 1:1 coaching	No	No	No
Discount Marketplace	Rx, car insurance, gas, entertainment	No	No	No
Employee Rewards	Yes	Yes		No
In-app communications tool	Yes, customizable for announcements, chats, etc	No	Activity feed, Branch Messenger	No
Shifts	Coordination, incentives	No	Yes	No

Earned Wage Access: The Key Players

This list is not exhaustive but it highlights the four pillars of our EWA program.

No debits. Payactiv does not use ACH debits that trigger overdrafts.
The CFPB has specifically said that providers who use debits do not comply with the CFPB’s advisory opinion.
Most Compliant in the Industry. Payactiv’s model is compliant in all 50 states and Payactiv indemnifies its clients.
Payroll-based. Payactiv’s deduction amount is accurately and clearly disclosed on employee paychecks so that workers and payroll departments have full transparency.
Safe & Responsible. Payactiv protects employees by providing safe and responsible access to net wages so that users do not end up with zero net pay on payday. This protects against payment of larger recurring expenses like rent, utilities, car payments, + +

Third-Party Articles

Here are great third-party articles about the EWA marketplace from trusted sources. Don’t worry – we picked the best articles, not the best articles about Payactiv. You already know we’re great.