Josep Maria Elias | Chief Strategy Officer, CloudPay
The workplace has undergone massive change in recent years, a transformation that is changing employees’ expectations of employers. Trends like the Great Resignation and Quiet Quitting were born in part from an increased demand for greater welfare and fairness in the workplace. Combined with the flexible or remote working approach employees now expect, it’s more important than ever that employers offer benefits fairly across the globe and ensure all employees are treated equally, regardless of location.
Since the topic of Earned Wage Access is attracting so much attention in the payroll and HR community, for its potential to attract and retain talent, CloudPay asked Everest Group to research the topic from a global perspective and the result is this definitive report ‘Global Earned Wage Access (EWA); Strategic Benefits for Employers and Financial Well-Being for Employees’.
A truly global benefit?
Everest highlights that whilst there is a growing demand for EWA solutions from global workforces and employers, global solutions are in short supply. Despite this need, there is only a handful of vendors offering EWA solutions, with even fewer providing a global approach.
Most solutions are offered only in one region. This is indicative of a reluctance to change what may be viewed as ‘unbroken’ processes in payroll, or the lack of awareness of the availability of a global solution.
In the report, Everest compare EWA vendors across the globe and reveal that no other provider has the global reach that CloudPay offers, with many tending to be mainly US-centric.
According to the analysis, CloudPay NOW is the only offering of its kind available across North America, MEA, Europe, APAC and ANZ. In fact, CloudPay NOW is currently in 45 countries and expanding.
Everest classifies EWA solutions under two business models:
Employer-enabled or B2B
The employer enrolls with the EWA solution, integrates the solution with payroll, and offers EWA as an employee benefit or a low-cost option. On the scheduled payday, the employee gets the remaining salary.
- This is what CloudPay offers – but only as a NO-cost to employee option.
Direct-to-employee or B2C
Employees can download an EWA mobile application, submit proof of income, and, when required, access a portion of their income through the application.
- This model is like a digital cash advance, or a payday loan, and may lead to overdraft or interest charges.
No fees for employees?
It’s important to note that B2B EWA funding models vary between vendors. Some offer EWA solely as a benefit to employees, funded by the employer. Other providers offer services for which employees pay some or all of the cost.
Everest found that few enterprises currently leverage EWA as a paid benefit, with most choosing to pass on the charges to employees through transaction fees, but that the model where employers pay for EWA is gaining traction as an attractive benefit for employees. At CloudPay we are experiencing this increased demand with new customers onboarding every month.
According to Everest, EWA is a differentiated offering that provides employees an improved experience, as well as supporting financial well-being; thus, enterprises can offer it to build their brand and attract and retain talent. Employers are even listing EWA as a benefit when posting job descriptions as a pull factor for recruitment activities. For example, for roles such as caregivers in the healthcare industry or housekeepers in the hospitality industry in the US, employers include EWA as a listed benefit
CloudPay is the only global provider of EWA provided wholly as an employee benefit. Other vendors either charge transaction fees to the employee or make employee payments only to a card issued by the vendor, which means the employee may incur charges when transferring their money to their own account.
The difference with CloudPay NOW is making payments direct to employees’ own debit or credit cards
90% of CloudPay NOW users make their withdrawals to their personal debit cards, so that the cash is available almost instantly in their bank accounts. Withdrawals are made from the mobile app, 24/7.
The withdrawal pattern we see from CloudPay NOW users is frequent, relatively small, precise amounts drawn down throughout the pay period. This suggests it is primarily being used to manage regular bills almost like a ‘digital ATM’, rather than to make unusual, one-off purchases.
With the current cost of living crisis impacting millions of people all over the world, allowing employees instant access to a proportion of their earned wages ahead of the usual monthly payday helps them handle unexpected financial events better, without getting into debt. It can also help them feel more valued by an employer willing to take steps to help them during a particularly challenging period.
What About Regular Payrolls?
The instant payments method that’s used in our EWA app, can also be applied to regular net payrolls. CloudPay offers a solution that makes regular net salary payments to employees’ personal cards. This means transactions take 30 seconds rather than the typical 3 days through the banking system to a bank account number. More information can be found in this eBook.
The major business change this brings is a reduction in payroll payment cycles that typically take 2-3 days through banking systems, down to seconds. This time saving in the payroll cycle can extend to 5 days when CloudPay’s new short-term funding service is utilised and means liquidity remains with the client for longer.
Such time savings are huge for payroll teams that constantly battle against the calendar to achieve accurate and timely salary payments. And treasury functions are keen to take advantage of the benefits those extra days bring to capital management and cash flow.
The EWA regulatory environment
The debate centering around whether, under certain models, EWA amounts to a loan, has made for a complex and uncertain regulatory environment. The direction of travel of regulatory body opinion appears to be to make the distinction between pay on-demand/EWA which is a benefit provided and wholly funded by employers to provide pre-payday access to earned wages, and other solutions that may charge the employee and potentially offer a pay advance. The term ‘earned wages’ is fundamental here, as is the funding model.
Two reference points:
- UK’s HMRC amends secondary legislation on salary advances and RTI reporting requirements – within the November 2022 Agent Update, HM Revenue and Customs (HMRC) has addressed how salary advance payments are to be treated going forward.
- The US Consumer Financial Protection Bureau (CFPB) released its final Advisory Opinions Policy on November 30, 2020, confirming that covered EWA programs are not subject to TILA and Regulation Z.
CloudPay’s position has always been, and remains, that we provide access to earned wages only, and only as a 100% employer-funded employee benefit.
The EWA bottom line – fairness, control, and flexibility
Expectations of employees have changed since the pandemic, leading to the Great Resignation and a War for Talent. As a result, employers are looking for new ways to attract and retain talent and set themselves apart from other organisations competing to fill vacant roles.
But is the bottom line really that it’s just fair to give people their wages once they’ve worked for it? Why should they have to wait until a payday set at the employer’s convenience? We are an on-demand, mobile society, accustomed to getting services NOW, including managing our finances through a digital, mobile interface.