Dispelling the 5 Biggest Earned Wages Access Myths 

By Shelly Kalra

Humans are naturally risk-averse, which often leads to the road most-traveled thus making decisions that feel most comfortable. But risk management, as sometimes perceived, is not about taking no risk; instead it’s about exercising informed judgment and finding practical solutions that balance risk with business objectives.

One solution in the HR technology/payroll space that has gained traction in the last few years is Earned Wage Access (EWA), which allows employees to access their already earned net pay before their designated payday. EWA has grown in popularity because it gives workers a more flexible pay structure and greater financial stability. Giving workers instant access to their wages means an employee who finishes their eight-hour shift can immediately request their money for the eight hours they worked instead of waiting a week or two. Using EWA, an employee’s money is readily available in case they need to cover a much-needed bill or an unexpected expense.

Despite the overwhelming positive impact of EWA on employers and employees alike, there are a number of myths associated with the product that might make some risk averse to adopting EWA. As Vice President of Operational Risk at DailyPay, a leading EWA provider, I can empathize with the caution that HR and payroll professionals have when deciding if EWA is right for their business. Throughout my career, I’ve spent countless hours evaluating third-party services and performing risk assessment, so I started to think as an employer looking to offer EWA solutions to employees: What are the types of myths/risks I should be thinking about and how do we at DailyPay help address them?

Myth #1:

There is a need to change the payroll process, which can be a significant investment of resources and expense. 

Most EWA solutions don’t require employers to change their payroll process at all. At DailyPay, we seamlessly integrate into all major payroll systems and connect with employees through their direct deposit, allowing employers to offer EWA while still maintaining their standard payroll distribution schedule

Myth #2

Additional resources and skills needed to implement and manage the EWA benefit. 

Typically, EWA products integrate seamlessly with most payroll and time management systems and require minimal changes from employers. DailyPay, for example, integrates with 180+ HCM, payroll and time management systems, reducing the upfront implementation lift. Also, our Client Success team possesses deep expertise in HR platforms and works with our clients soup to nuts making it a very seamless experience.

Myth #3

Employees are charged significant fees and interest rates by EWA providers. 

DailyPay, in particular, never charges an interest rate and we have three ways employees can access their earned pay–two of which have no fees:

• No-fee transfer option to any account (1-3 business days).
• No-fee instant transfer when users use Friday by DailyPay™, an app and general purpose reloadable (GPR) card that allows DailyPay users to access instant EWA for no fee if they update their direct deposit to Friday.
• Instant transfer to any account — $3.49 (can vary by specific program)

Myth #4:

EWA encourages employees to spend money impulsively and may not address the underlying financial issues that contribute to financial instability. 

This is certainly a valid good concern, and I am glad folks are thinking about it. Our mission at DailyPay is to create a financial system that works for everyone. According to our data, the top reasons DailyPay users make a transfer are for things such as bills and utilities, food and groceries, and auto/transportation. With financial education available on our platform, we strive to create a world where workers no longer have a need for payday loans or pay overdraft fees to make ends meet. And the research that has been done supports our goals. According to  a study from Aite Novarica commissioned by DailyPay, 95% of those who were previously reliant on payday loans in any way either stopped using payday loans (81%) or reduced use (15%) after using DailyPay. 97% of those who said they had overdrawn their bank account prior to using DailyPay now rarely or never incur overdraft fees (79%) or report experiencing fewer instances of overdraft fees (18%) after using DailyPay.

Myth #5

EWA is Credit

Earned wage access is not credit for several reasons. First, all true EWA products, including DailyPay, only allow access to funds already earned. EWA is not an advance on wages an employee hopes to earn in the future. Second, with EWA, there is no underwriting, no interest, no installment payments, no promise to repay, no collection activity, and no recourse of any kind. EWA is also offered to everyone equally, regardless of their creditworthiness. This means that all eligible employees on DailyPay’s platform have equal access to our low-cost and no-cost services and neither our pricing structure nor an employee’s access to their earned wages are based on the previous financial history of an employee. For these reasons alone, EWA is not a loan.

While there is always some risk when it comes to partnering with a third-party vendor, the reward for HR/payroll professionals as it relates to EWA can be quite significant. Financial equity and inclusion are aspects often overlooked by companies. Financial equity and inclusion mean ensuring individuals have equal access to professional opportunities, financial systems, products and services, and ultimately, wealth. With on-demand pay, employers provide a much-needed lifeline and cash flow to their employees, who are often unbanked or underbanked.