Employees Shouldn’t Have to Pay to Access Their Pay: The Next Evolution in Financial Equity

In the U.S., employees earn a paycheck for working for their employers. However, how wages are delivered continues to evolve, and so do challenges to the principle of fairness. Earned wage access (EWA) offers employees early access to their wages before payday, yet charging fees undermines the trust central to financial equity. It’s time to eliminate these fees and redefine what fair pay looks like.

A historical perspective: Wage protections and the fight against fees

It is a well-established norm in the U.S. that employees should be protected from paying fees to receive their pay. History demonstrates that protecting wages has been a priority for almost a century. Here’s how wage discounting practices have evolved:

• 1930s–1940s: Employers deducted fees directly from employee paychecks, reducing employees’ take-home pay. The Copeland (Anti-Kickback) Act of 1934 and the Fair Labor Standards Act (FLSA) of 1938 stepped in to prohibit this type of wage discounting and wage theft, safeguarding wages.

• 1990s: Check cashing and payday lending services introduced fees for accessing wages. Heavy state regulation and financial innovations, like direct deposit and pay cards, emerged to combat these costs.

• 2010s: Fintech Earned Wage Access (EWA) providers offer early wage access, but many charge employees fees for this convenience, echoing the wage discounting of past decades.

These patterns reveal a recurring truth: employees shouldn’t pay to access their earnings. 

When is paying a fee acceptable?

Historically, consumer banking and money transfer services have charged fees for added convenience, but only after employees have full access to their money (i.e., it’s in their personal account). These fees are deemed acceptable because employees’ pay is in their hands. It’s been deposited.

 For example:

• Banks typically charge $0–$40 for domestic wire transfers and $0-$75 for international transfers.

• Banks charge account maintenance fees, typically if a member falls below a certain minimum, usually $5-$25 monthly

• Peer-to-peer money transfer apps, such as Venmo, Cash App, Zelle, or PayPal, charge 0.5%-1.75% for instant transfers.

What makes these fees different? They occur after employees have complete control over their money and the employer has fulfilled all wage obligations.

What’s wrong with paying a fee to access early pay?

Employer-sponsored EWA involves the delivery of employee wages to employees before the regularly scheduled payday. Here’s the typical model:

• EWA is an employee benefit that requires a contract and data integration between the EWA provider and the employer.

• An employee receives funds based on employer payroll data.

• Repayment to the EWA provider occurs when the employer runs payroll.

EWA services have emerged as a critical financial tool for workers, yet fee-based models can undermine their value. Having employees pay a fee to access their pay:

• Contradicts wage protections: Charging fees to access earned wages before payday mirrors wage discounting practices, which many states have enacted legislation against.

• Exacerbates financial stress: For employees living paycheck to paycheck, these fees create additional financial burdens instead of alleviating them.

The solution: Fee-free EWA

The only way for EWA providers to ensure compliance with laws against wage discounting is to deposit EWA funds, without fees, directly into an account where the employee can use them. EWA providers must eliminate fees for accessing wages to align with wage protections and modern financial equity.

Here’s how EWA providers can accomplish this:

• Provide fee-free access: Deliver wages directly into employee accounts, without any fees.

• Allow freedom to choose: After accessing their wages, employees can transfer funds using regular consumer banking services and pay any necessary fees.

This approach ensures compliance with wage and hour laws while empowering employees to manage their earnings without any hidden costs.

A vision for the future: Fee-free financial solutions

As fintech continues to redefine financial access, we must prioritize solutions that respect employee rights and foster trust. Fee-free EWA isn’t just a compliance necessity but a step toward equity. Let’s build a system where employees keep every dollar they earn and choose how to use it.

Ready to help employees take control of their finances without hidden fees? Explore how Chime Workplace^TM is making financial wellness accessible with a suite of fee-free solutions.