Summary Definition: A financial service that allows employees to access earned wages before their next scheduled payday.
Earned wage access is a financial service where employees can choose to access their accrued wages before their next scheduled payday. Also called on-demand pay, wages can be disbursed in multiple ways, including a mobile app, direct deposit, or a payroll card.
While valuable for employees facing unexpected expenses or debts, there is a risk of employees withdrawing too much too early, potentially leaving them unable to cover necessary expenses when their regular payday arrives.
Employers can offer earned wage access services by partnering with a third-party and integrating that service with their existing payroll software. Employees can then use the third-party’s app or a website to request their earned wages whenever they need. The service will disburse the funds to the employee and deduct the amount from the employee’s next paycheck.
Instead of accruing interest for repayment like a personal loan, wage requests can have fees applied to the amount in the request. Earned wage access providers can use a variety of fee types or systems, such as charging a percentage of the total amount accessed or simply adding a flat fee for each transaction.
To avoid accidental tax penalties or liabilities, earned wage access providers can choose to limit the amount a request can access after calculating approximately how much net pay the employee will have based on their current elections and deductions. This guarantees the employee won’t accidentally request too much of their wages to cover the payroll taxes applied on their next payday.
Offering access to earned wages provides benefits for both employers and employees:
Unexpected expenses happen. And they don’t wait for pay day. When your employees need an immediate cash flow option, our On Demand Payment gives them flexible access to their earned wages without interrupting your payroll process. Your workforce can do this directly from our mobile app. That means there’s no added paperwork for you – and it helps employees satisfied in a competitive market.