Don’t Be Fooled. Know What “No-fee” Earned Wage Access Truly Is.
Employer integrated Earned wage access (EWA) has proven to be a game-changer for frontline workers over the last decade. As a lifeline to hourly workers, EWA offers them a way to access their earned pay before the next payday. EWA continues to grow in popularity because it helps employees handle unexpected expenses and manage cash flow, without resorting to costly alternatives.
However, as EWA becomes increasingly widespread, confusion about its various payment models and costs can leave HR and payroll professionals scratching their heads. When they hear about “no-fee” EWA, they may be left wondering, “What does ‘no-fee’ EWA actually mean?” Many EWA vendors claim to offer a “no-fee solution,” but there are often still fees associated with the products.
Let’s try to demystify no-fee EWA, discuss its benefits, and explain why it’s becoming a critical workplace benefit for the future.
What EWA models are most widely used today?
Employer integrated Earned Wage Access allows employees to request a portion of their wages as they earn them, rather than waiting for a scheduled payday. This model has gained traction as an answer to the financial stress experienced by many frontline workers living paycheck to paycheck. However, not all EWA programs are created equal.
Three primary models currently dominate the EWA landscape:
Fee-based EWA, where employees either pay a fee for each transaction, which is often compared to an ATM fee, or a subscription fee.
Tip-based EWA, where employees can leave optional tips when accessing their wages. In these models, tips have been paid 73% of the time according to one study.
No-fee EWA, with access to funds usually between 1-3 days and with optional fees, such as expedited fees or tips.
We believe that there should be a fourth option: No-fee instant EWA as part of a financial wellness suite of products.
Navigating these options can be challenging for HR and payroll professionals if such professionals don’t know what to ask when selecting a provider. This underscores the need to clearly define and differentiate true no-fee EWA.
What does "no-fee" EWA really mean?
While the term "no-fee" EWA has traditionally applied to free access to funds within 1-3 days, it actually should only refer to solutions that cost nothing for employers or employees. This means:
No fees for your employees to instantly access their wages.
No tips or subscriptions.
No costs to your company for implementing and maintaining the program.
The no-fee model provides a seamless experience, as neither employers nor employees bear the financial burden for EWA. However, this begs the question, “If neither employers nor employees are paying, who’s actually covering the cost, and how does an EWA provider make money?”
How can earned wage access fees be waived? Who pays?
Traditional EWA providers typically charge user fees because they have limited other sources of revenue. The most common model is the instant access fee which averages $3.18. These instant access fees are often paired with a free option with access to funds typically within 1-3 days, but these free options are utilized infrequently.
So how can an EWA provider waive instant fees? Well, when EWA is offered as part of a broader financial wellness platform, there are other products that generate revenue. For example, banking platforms could offer free EWA to attract direct depositors just as some have done with free overdraft. This is how Chime is able to offer no-fee EWA through its MyPay at WorkTM solution. For employees, the multi-product platform not only provides tools to save, build credit and progress financially - it also enables no-fee EWA. That’s a win-win.
A call to action for employers
As employee demand for responsible, flexible financial tools continues to grow, no-fee earned wage access is becoming a must-have benefit, not simply a nice-to-have. But the details matter.
Now is the time to evaluate your EWA offering. Look beyond the marketing claims and understand what fees exist so you can best set expectations with your employees. Are employees truly paying nothing?
Partnering with a truly no-fee EWA provider is a win-win for employers and employees. It improves financial wellness, enhances employee retention, and positions your organization as a leader in responsible employee benefits.
Earned wage access can be a transformational benefit, but only when delivered the right way. Make the move to a solution that empowers your workforce.
For more information about Chime’s MyPay at Work, request a demo.
