Earned Wage Access: Employers offer help to cash-strapped workers

Forget having to wait for payday!

Some companies today allow employees to withdraw the wages they’ve already earned even before the 15/30 pay period ends.

Earned wage access (EWA) is gaining traction in Southeast Asia, and cash-strapped workers in the Philippines are expected to benefit from the shifting tide.

With seven in 10 Filipinos struggling financially, some run low on cash even before their next paycheck arrives, according to EWA specialist Paywatch Philippines.

The rising cost of goods and slow wage growth in the country force many to turn to traditional loan sharks and predatory loan apps to make ends meet – in a period known colloquially as petsa de peligro.

Unlike payday loans that charge exorbitant fees and only worsen a person’s financial troubles, EWA makes a portion of employees’ salaries available as and when they accrue.

The payout system “is just much easier” and more easily accessible, according to Rowell del Fierro, president of Paywatch Philippines.

Earned wage access is NOT a loan to employees

Employers might view the concept of EWA as a form of advance or, in Filipino, bale. EWA, however, isn’t a loan to the employee. Rather, the funds have been earned and are credited to employees’ accounts ahead of the usual fortnightly payout in the Philippines.

“EWA is not a loan. It has no interest rate because you’re accessing and withdrawing your earned money. With a fixed transaction fee, it will enable employees to easily advance their wages before payday to pay for their immediate expenses,” said Roy Gabriel, chief innovation officer, and general manager of PayKey, an Israeli fintech company also specialising in EWA.

“We hope that with our solution, we can help banks and employers reduce employees’ financial stress and improve their well-being.”

The benefits of EWA for employers and workers

By alleviating the burden of cash-strapped employees, EWA aims to produce other benefits for companies, such as higher employee satisfaction and retention rates.

For Alex Kim, co-founder of Paywatch: “Financial stress contributes to retention and productivity issues. This is a pervasive challenge globally, where 1 out of 5 employees admits that productivity at work has been impacted by financial stress.”

The luxury hotel operator Shangri-La Group has already rolled out the payout system to steer staff members away from payday lenders and promote better financial health and freedom.

“If they can access their earnings, that should be the first pocket that they should access and not loans,” del Fierro said, as quoted by Rappler. “As far as Shangri-La is concerned, they will try anything that they feel is progressive. They don’t want to promote loans. But they want to improve the well-being of their employees.”

EWA adoption in Southeast Asia

Other early adopters of EWA in the Philippines include Dunkin’, Rustan’s and Wilman International.

While del Fierro believes this form of employee benefit is in its early days, EWA has a huge potential to change the game for companies and workers alike.

“This will be an employer initiative,” he said. “I think this can grow really big that companies will eventually adopt [it], especially now that it’s difficult to retain staff. It can be a powerful tool to deploy.”

This year, Paywatch hopes to serve 100,000 users, targeting employers with over 1,000 people on their respective payrolls before moving on to small and midsize businesses. Apart from its presence in the Philippines, Paywatch also operates in South Korea, Malaysia and Indonesia.

Another flexible pay specialist, the Filipino-founded Advance, is establishing a wider regional presence with its US$16 million pre-Series A funding round and entry into Vietnam. Advance aims to offer “fair and accessible financial services” by providing salary advances to underserved communities.

“We’re very excited at the prospect of doing this in two markets, both of which are still addressing a major credit gap across borrowing segments,” Advance CEO and co-founder Jaime de los Angeles said.

Earlier, Vietnamese fintech GIMO raised US$17.1m in Series A funding to bolster its own EWA service.