EWA Cards & EWA account transfers - Better Alternatives
Diwali is our biggest festival and it is natural for employees to expect a Diwali bonus. In many cases employees go further and even ask for access to their pay before payday to finance a big purchase. This practice is called an employee pay advance in most cases. Others use their credit cards or take personal loans sometimes at exorbitant rates. Employers want to help their employees but foresee risks like
Moral hazard as it may influence the Financial choice of the Employee
Providing timely access to pay works very well for most employees but for a minority it may create pressure to spend the money immediately instead of holding on to it so that they can pay their bills later. This could lead to even more financial distress for the employee down the road.
Increased risk for the company and pressure on the manager
Giving employees access to their pay before payday can also put the company at risk. If an employee uses their advance, and then, decides to leave the company this puts the company in a bad position. This can lead to both financial and personnel problems for the business down the road. Request for advances also puts the manager in a difficult position because they may feel like they have to say yes in order to keep their employee happy.
Operational burden
Managers have an additional burden when it comes to paying advances. Not only do they submit the advance, but also make sure that the advance is deducted from their paycheck in order for the business to not be out of additional funds!
Employee pay advances can be beneficial for both employees and employers, but there are also some risks that should be considered before agreeing to one. As a manager, you should weigh the risks and benefits of giving an employee an advance on their paycheck before making a decision.
If this is a common practice in your company, you should consider making this a more standard practice by using a company like FINFI to allow employees access to their earned but unpaid wages at no risk to the business. FINFI also provides compelling saving solutions as part of a comprehensive wellness platform