Earned Wage Access App: A Guide for Small to Midsize Businesses

As a small to midsize business owner, you're likely no stranger to the financial struggles that come with managing a team. Employees often need access to their earned wages before payday, which can lead to financial stress and decreased productivity.

Research shows that 75% of employees live paycheck to paycheck, making it essential to offer earned wage access to your team members. This can be a game-changer for your business, as it helps reduce turnover rates and increases employee satisfaction.

Earned wage access apps can provide a solution to this problem by allowing employees to access their earned wages before payday. These apps typically charge employees a fee, which can range from 1-5% of the transaction amount.

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Earned Wage Access is a financial service that lets employees withdraw a portion of their wages as they earn them, rather than waiting for the traditional payday.

This service is available via the Swag app and is available to employees of organisations using Employment Hero HR and connected Payroll.

Employees can request up to 50% of their earned wages, which is capped at a maximum of $1000 per week, for a 1.3-1.5% fee per transaction.

Earned Wage Access can be a game-changer for those who occasionally need quick cash to cover unexpected expenses or to avoid costly late fees.

Employees are no longer bound by traditional pay periods, and can access a percentage of the wages they've already earned whenever they want.

This service is often added to company benefits to help workers who might be dealing with cash flow issues, and is quickly becoming an established business practice.

Earned wage access apps offer a range of benefits for employees, including financial flexibility and reduced stress.

With on-demand pay, employees can quickly tap into their earned wages, often within hours, making it easier to cover unexpected expenses or avoid late fees on bills. This can be particularly useful for emergency expenses, such as auto repairs or medical bills.

Employees who use earned wage access apps can also reduce their reliance on short-term credit, such as payday loans or credit cards, which can save them money in interest charges.

Here are some key benefits of earned wage access for employees:

By offering earned wage access, employers can improve employee satisfaction, retention, and productivity, while also reducing turnover and hiring costs.

Providing meaningful employee benefits is crucial for attracting and retaining top talent. It's a game-changer for employees who need access to their earned wages before payday.

On-demand pay is a flexible benefit that can be a lifesaver for employees who face unexpected expenses or financial emergencies. With EWA, employees can tap into their earned wages within hours, often without the need for credit checks or high-interest loans.

Some employers offer EWA as a benefit, making it easier for employees to access their funds. However, not all employers offer this benefit, so employees may need to explore third-party apps or services.

Employers who provide on-demand access to earned wages experience a significant reduction in turnover, up to 29%, and receive 2X more job applicants. This is a win-win for both employees and employers.

Here are some other creative benefit ideas that can impact employees' financial wellbeing for the better:

These benefits can contribute to a smart recruiting strategy and bring peace of mind on several financial fronts. They're a great way to show employees that you care about their financial wellbeing and are invested in their success.

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Taxes are deducted from on-demand payments, but most EWA platforms don't tax EWA deposits, so you'll need to handle that aspect when you run regular payroll.

You'll want to figure out how this step works when you partner with a provider to avoid IRS penalties.

Offering an earned wage access (EWA) app as a benefit to your employees can have a significant impact on your business. By providing financial flexibility to your team, you can improve employee satisfaction.

Research shows that employers who offer on-demand access to earned wages experience a 29% reduction in turnover. This can save you a significant amount of money in recruitment and training costs.

Employees who have access to their earned wages when they need them are more likely to feel financially secure, which can reduce stress and improve well-being. This, in turn, can lead to improved morale and productivity.

Here are some key benefits of offering EWA to your employees:

By offering EWA, you can also expect to receive 2X more job applicants and experience a 5% reduction in hiring costs, representing savings of about $19,000/year for a business of 200 FTE on average.

Earned wage access apps are designed to provide employees with greater financial flexibility. They work by integrating with an employer's existing payroll system to track employee earnings in real-time.

Employees can enroll in the system and link their bank accounts to access their earned wages. This can be done through a mobile app or a self-service portal. The employee can then see how much they've earned during the current pay period.

Upon request, funds are transferred directly into the employee's designated account. The amount transferred can vary depending on the provider, but some EWA programs limit the number of withdrawals employees can make per month or pay cycle.

The EWA provider calculates how much the employee has earned up to that point in the pay period based on hours worked or a set salary. The employee can then request an advance on their earned wages through the app or platform.

The requested amount is transferred directly to the employee's bank account or a connected card. This process is often seamless and doesn't require any extra effort from the employer.

Here's a breakdown of the typical steps involved in using an EWA app:

Note that the specifics may vary depending on the EWA provider and the employer's payroll system.

Fees can vary depending on the app and the type of account you use. There are different fees for transactions into a Swag Spend account and external bank accounts.

Some apps charge a flat fee per transaction, such as 1.3% for transactions into a Swag Spend account or 1.5% for transactions into an external bank account.

Other apps may charge a fee based on the provider, with some charging up to $5 for payouts directly to employees' bank accounts. However, some apps offer fee-free payout options.

Here's a breakdown of the fees you might encounter:

Choosing a provider for your earned wage access app is a crucial step in offering this benefit to your employees. You should consider integration needs, such as whether the provider integrates with your existing payroll or timekeeping system.

Assess the need for integration with your existing payroll or timekeeping system versus a standalone no-integration solution like EarnIn. This will help you determine which provider is best suited for your business.

Here are some key factors to consider when choosing a provider:

As you explore different providers for Earned Wage Access, it's essential to consider several key factors.

You'll want to assess the integration needs of the provider, such as whether it integrates with your existing payroll or timekeeping system, or if it's a standalone no-integration solution like EarnIn.

To ensure a seamless experience for your team, evaluate the platform's ease of use, employee onboarding process, and ongoing support.

Consider the funding and cost structure of the provider, determining if they fund the EWA or if your company is responsible, and understand the fee structure for employees.

Look for additional benefits and features provided by the platform that promote employee financial health and overall well-being.

A good provider should have experience working with businesses your size, so ensure they have the necessary expertise.

Here are some key things to consider when evaluating a provider:

Choosing an EWA provider can be a daunting task, but don't worry, I've got you covered. Here are some key factors to consider when selecting an EWA provider.

Integration needs are a crucial consideration. Assess whether you need integration with your existing payroll or timekeeping system versus a standalone no-integration solution. If you do need integration, look for providers that offer seamless integration with your existing systems.

Additional employee well-being benefits are also a plus. Look for providers that offer features that promote employee financial health and overall well-being. Some providers may offer features such as employee perks and discounts, financial wellness tools, and tip payouts.

Funding and cost structure are also important factors to consider. Determine if the provider funds the EWA or if your company is responsible, and understand the fee structure for employees. Some providers may charge a per-transaction fee, which can vary.

Provider expertise is another key consideration. Ensure the EWA provider has experience working with businesses your size. This will help ensure a smooth implementation process and minimize any potential issues.

User experience and support are also crucial. Evaluate the platform's ease of use, employee onboarding process, and ongoing support to ensure a seamless experience for your team.

Here are some popular payroll providers that offer Earned Wage Access:

If you're using a human capital management (HCM) solution or professional employer organization (PEO), you may also have access to EWA without even knowing it. Be sure to check in and see if they are partnered with an EWA provider.

When evaluating providers, ask these important questions:

By considering these factors and asking the right questions, you can choose an EWA provider that meets your business needs and provides a great experience for your employees.