Myths about earned wage access

In India, the inflation rate as of?March’23 has hit 5.66% . The cost of living has been on an exponential rise with the uncertain economic times making it difficult for people to meet their needs with their limited income, thereby leading to an increase in financial stress.

While companies have traditionally focused on wellness plans to address mental and emotional well-being, personal finance has often been neglected, leaving individuals without proper resources. Only?27% of adults in India ?meet the minimum level of financial literacy as defined by the Reserve Bank of India. The statistics fall to 24% in terms of women’s financial literacy rate.?

With uncertainty being at an all-time high post-pandemic and amidst the war, it has become evident that being unprepared for emergencies and experiencing financial distress significantly impacts overall well-being. As a result, employee financial wellness has become a critical aspect of comprehensive employee benefits packages.

Some organizations offer liquidity access through salary advances, but the process can be time-consuming, disrupt company cash flow and not to mention: a painful ask on behalf of the employee involving stigma and unnecessary scrutiny. To address this, HR leaders with an outlook for the future have embraced innovative solutions like??Earned Wage Access ?(EWA), also known as Salary On-Demand, on-demand salary and on-demand wages or pay, which allows employees to access their accrued but unpaid salary before the traditional payday.

However, like any innovative solution relatively new in the market, there are certain degrees of misconceptions prevalent about Earned Wage Access, so let’s get debunking these myths!

Myth #1: Earned Wage Access is a form of debt

Fact: Many people believe that EWA is a form of debt or a loan, but it’s not. It’s a flexible employee benefit that allows workers to access a portion of their earned wages before their regular payday, within limits set by their employer, without incurring any debt or paying interest.?

Myth #2: Salary on-demand is an additional burden on the payroll systems

Myth #3:? Earned Wage Access is only suitable for low-paid workers.

Fact: On-demand Pay or EWA allows any individual to access their pay, if and when required. With changing working models, it has seen exponential adoption by professionals of all experience levels. With more than 1 in 3 Indians living from paycheck to paycheck, the majority of employees, if given a choice, would want to be able to access their salary based on their requirements rather than a day traditionally chosen years ago based on circumstances of the past.

Myth #4: On-demand Salary can lead to money negligence

Fact: EWA makes funds accessible to employees during a cash crunch in order to prevent borrowing or debt-traps. Employers can monitor usage, to safeguard employees from a habit of unnecessary spending. Additionally, a lack of financial knowledge can lead to irresponsible spending. To prevent this, companies offer personalized financial coaching to help employees make informed financial decisions.?

Myth #5: EWA providers put data security at risk

Fact: In India, there are several data protection laws and compliances in place which all fintech organisations, big and small, have to adhere to. Therefore, all EWA providers adhere to regulations mandated by RBI, thereby placing proper checks and balances in place to ensure optimum security and data protection.

Myth #6: Earned Wage Access is expensive

Fact: An on-demand pay solution usually comes with rates that are often lower than traditional payday loans or credit card interest rates. Usually, no hidden fees are involved. EWA solutions are relatively more pocket-friendly as compared to other employee benefits

Earned Wage Access ?is a means to the ultimate goal of empowering employees in India. By providing a platform that makes it easy for employees to access their accrued salary if and when required, before a traditionally set payday, makes employees not only secure from financial stress but also gives them a sense of liberation and control over their finances. It provides high perceived value to employees and serves as an investment in their well-being, employer brand, and competitive advantage for recruitment and retention.??