Earned Wage Access

1 November 2024

What is Earned Wage Access?

You may have heard of earned wage access described as “on-demand pay” or “instant pay”. The official government term is Employer Salary Access Scheme (ESAS). Earned wage access is a payroll scheme that allows employees to access their wages as soon as they earn them.

History

For the majority of the 20th century, employees were paid once per week. It was only once the Payment of Wages Act was carried out in 1960 - forcing employers to pay by cheque rather than cash - that employees were paid monthly.  

Banks and companies were happy to implement a monthly payroll, since it saved them a lot of money on paper and admin. But employees weren’t so happy. In fact, it took a quite few years for the monthly payroll to be widely adopted across the UK (there were protests!). 

Interestingly enough, the monthly payroll is still not a very popular way to pay employees. In fact, hourly employees prefer getting paid every week and most workers prefer being paid at least every 2 weeks. It makes it easier to budget, it avoids resorting to use payday loans and means employees aren’t creditors to their own employers.

As an HR manager, is there any way you can help increase the frequency with which employees are paid, without having to disrupt your entire payroll system? Yes, and it has three words: earned wage access.

How does it work?

An ESAS is a payroll scheme that allows employees to access their wages as soon as they earn them. By leveraging specific technology applications, employers can install an integrated solution that sits on top of their existing payroll, and allows employees to access their wages before payday. 

According to PwC’s employee wellness survey, 47% of employees are currently stressed about their financial situation. Which is why offering an earned wage access scheme is a great way to help people manage their finances more efficiently - at no additional cost to you, the employer. No wonder Employee Benefits News calls this the “the most important benefit in a post-Covid-19 world”.

Let’s dive a bit deeper into how a salary advance scheme helps both employees and businesses

Benefits for Employees

According to the Centre of Labour and Social Studies, 20% of British workers suffer a shortfall of more than £100, and over 10 million struggle to keep up with paying for household bills.

With Covid-19, these numbers have only increased. There’s a real problem when it comes to managing cash flow, and the most common solutions - payday loans and credit cards - only make the problem worse. Here’s how an EWA scheme can help your employees:

Employees are always struggling to save money, and this problem has only been exacerbated throughout the Covid-19 pandemic. When your salary only comes in once per month, everything quickly gets eaten up by rent, mortgage and bills - making it a lot harder to form a habit to save.

With earned wage access, employees can focus on building a habit that actually helps them grow their savings and build an emergency fund. In general, EWA improves financial stability for employees and makes it a lot easier to manage money on their own terms. Since employees have more control over their earnings, they can choose when to withdraw and build a system that works with their monthly commitments.

According to Mirror Money (Tricia Phillips, Mirror, 28 March 2019), half of British workers run out of cash before payday. And it’s always those last few days that are the hardest. With weekends and bank holidays in the middle, it can often take longer for an employee’s salary to hit their bank account. That’s when many of them resort to payday loans and other expensive credit solutions which can quickly spiral out of control.

ESAS does not involve any credit, credit checks or interest. Employees access their own earnings in their own time, and with FlexEarn, they only pay £1.50 per withdrawal. This helps employees avoid hundreds of pounds in fees while keeping them out of the debt trap. 

Benefits for employers

When employees don’t feel supported and are financially stressed, business suffers. According to Personnel Today, lost productivity due to financial stress costs UK companies around £15.2 billion (Ashleigh Webber, Personnel Today, 16 Dec 2019) every year. That’s a huge number, and it’s also why it’s worth looking for ways to fix the problem. 

3 in 5 British workers (Neyber, 2019) are worried about money, with the number one stress being not able to cover emergency expenses. As we’ve mentioned above, these stresses severely affect employee productivity, and therefore cost the company a lot of money over time.

The good news is that EWA programmes are a great way to solve this number one stressor: by having access to wages as soon as they are earned, employees can rest assured that they’ll be able to cover emergencies. 

Put yourself in the shoes of an employee: imagine you need to pick between two jobs with similar salaries, but one offers an EWA scheme while the other doesn’t. Which do you pick? You’ll likely pick the salary advance scheme, since you know it’ll help you manage your money more efficiently and cover unexpected emergencies. Another big benefit is that employees can see how much they’ve earned as they go along. Employees (especially hourly paid) often use the app just for this purpose. 

With an ESAS scheme, not only are you helping employees manage their money, but you’re also showing them that you value your workforce. This helps increase the trust in your company, which results in reduced employee turnover, higher employee satisfaction and a better company culture. And with FlexEarn, it doesn’t cost you, the company, anything. 

Why use FlexEarn?

We’ve just seen that advance wages offer many benefits for both employers and employees. With FlexEarn, there’s the added benefit that setting up an EWA with us is free and easy. 

Our technology is one of the easiest to use: we can integrate all forms of timesheets, and we don’t make employees set up new bank accounts to route their salary (which isn’t the case with other earned wage access schemes). We pride ourselves on being one of the easiest EWA schemes to set up: no adjustments need to be made to the existing payroll process, and the employee app is incredibly easy to use. We are also integrated with Sage, so it’s straightforward to connect with us if that’s your accounting system. Our fees are transparent: £1.50 per withdrawal and that’s all. 

An Employee Wage Access scheme is a solution that brings our outdated payroll system to the 21st century. By allowing employees to access their income as soon as it's earned, we empower them to take control of their money and reduce the number one stress in their lives. At FlexEarn, we’re on a mission to increase employee’s financial wellbeing and help employers build better relationships with their workforce. 

Want to help increase your company’s productivity? Contact us to learn more about installing an EWA scheme.