Jonny Nash, CloudPay NOW Operations & Implementation Manager
Pay on-demand, or earned wage access, is quickly gaining traction as an employee benefit to deliver flexible pay. Yet many employers worry about it – from concerns about employee behavior to extra work for payroll teams. Let’s debunk some of the most common myths about pay on-demand.
MYTH 1: Pay on-demand is the same as advances or loans
TRUTH: Pay on-demand, or earned wage access (EWA), is very different to a loan or pay advance. With pay on-demand, employees can access only the wages they’ve earned, within limits set by their employer – up to a certain percentage of net pay. * Earned wages are calculated on either a percentage of the previous month’s net salary or real-time approved shift data from the existing time & attendance system.
MYTH 2: Pay on-demand creates extra admin burden for payroll teams
TRUTH: Pay on-demand makes no difference to your existing payroll processes, there is no extra effort for the payroll team which makes this a low-impact, high-value benefit for the employer and the employee. Payroll is calculated in the normal way and net pay is either adjusted through the payroll gross to net calculation or from the final net payment.
MYTH 3: Employees won’t have any money left come payday
TRUTH: With a true earned wage access solution, provided by employers as an employee benefit, employers are in full control of how much earnings are made available for pay on-demand. In addition, employees can commonly set their own limits for pay on-demand too, such as how many times in the payroll period they can draw down, a maximum amount, or maximum percentage of earnings they want to be able to access.
MYTH 4: Pay on-demand is expensive
TRUTH: A true earned wage access solution costs nothing for employees to use. It is paid for by employers and is comparatively low cost compared to other common employee benefits, delivering a high perceived value to employees.
Employers should recognise that EWA is an investment in employee wellbeing and their employer brand, as well as being a competitive differentiator for recruitment and retention.
MYTH 5: Pay on-demand is only suitable for low-paid workers
TRUTH: Pay on-demand can work for people at all levels of the pay scale. While it has its roots in supporting typically lower-paid industries like hospitality, retail or manufacturing, pay on-demand is valuable to any individual that wants control over how and when they get paid. This flexibility and control over pay reflects what individuals experience with services and banking in the on-demand society in which we now live. In fact, 77% of people are interested in choosing their own payday. **
Our customer data also shows that 30% of pay on-demand withdrawals are made by people earning more than a $30k salary. We can also see that the average number of withdrawals has increased from 2.2 per month to 5.6, and withdrawal amounts have come down to around $80 from $130, suggesting that people are using pay on-demand to manage their expenses almost as a ‘digital ATM’.
*60% of net pay in CloudPay NOW
** CloudPay LinkedIn poll, August 2021, 144 respondents
Learn more about how you can deploy Earned Wage Access within your organization in partnership with CloudPay here.
Jonny Nash, CloudPay NOW Operations & Implementation Manager