Earned wage access (EWA) providers partner with employers to give employees access to a portion of their earned wages ahead of payday. This can help people cover unexpected bills, avoid overdraft fees, and improve cash flow between paychecks. In the past several years, EWA has become table stakes to offer your workers. It's now a benefit that most workers have come to expect, and one that most companies know they need to offer if they want to attract and retain talent.
While most EWA providers do the same thing, they don’t all operate in the same way—and there may be ramifications for companies and employees who choose a provider that doesn't operate in a compliant, legal manner. (For example, some providers don't even deal with standard EWA deductions—they actually use a form of wage assignment that's considered unlawful in some states!) Before choosing an EWA provider, make sure they check these boxes if you want to make it a compliant, seamless process for you and your team.
1. Employer-based solution
The Consumer Financial Protection Bureau (CFPB) has guidelines that state EWA providers should contract with employers to offer their solution. Branch works directly with employers to offer EWA to employees, in accordance with this guidance. Without having to change payroll processes, we integrate directly into employers’ time and attendance systems to confirm who their employees are, when they’ve worked, and how much they’ve earned.
2. Encourages responsible use
Another feature to look for in an EWA provider is whether or not they encourage responsible use. Earned wage access provides people with faster access to funds they’ve already earned, so it’s not a payday loan, but the right EWA provider should also include financial wellness tools and guardrails that help employees grow financially.
While many EWA providers encourage users to constantly take out more advances, our model is set up so employees use EWA more like an emergency fund if they have an unexpected expense come up between paychecks. Employers also have the option to set the percentage of earnings employees can access. Plus, we offer free financial wellness tools, cash back rewards, and fee-free financial services that can help people manage their earnings, eliminate fees, and stay on top of their budget.
Learn more about Branch's EWA here.
Read the terms and agreements on some EWA providers and you might be surprised to learn about the hidden fees they charge both companies and employees to use it. Many providers try to hide these fees with verbiage around "membership models" while others hide their fees in the fine print.
Branch believes the point of earned wage access is to help workers become more financially stable. What’s the point of charging them a fee to access their own money? Or charging you, their employer, for using this service in the first place?
4. ONLY deducts the earned wage access amount
Some earned wage access providers don’t even work in deductions—they do something called “wage assignment” which requires employees to deposit their entire paycheck into a separate bank account controlled by the EWA provider. In this model, an employee with a $500 paycheck and an outstanding $100 EWA transaction is forced to deposit the entire $500 into an account controlled by the EWA provider. The employee must agree to assign these wages in advance—before the money is even earned. In many states (California being one of them) this type of wage assignment is considered unlawful.
To make sure you’re safe and compliant, find a provider who only deducts the amount of the earned wage access—and no more. It’s the best way to not only keep your employees happy and financially secure, but make sure you’re following state and legal guidelines for earned wage access.
*A quick note about deductions*
How your earned wage access provider deducts or recoups wages is a central component to consider when making your selection. It may be difficult to understand the method your provider uses unless you use very specific language. Here are some questions you may pose during your research:
- How is EWA recouped from employees?
- Is the provider’s method of recoupment an assignment of wages?
- Does the provider comply with FTC rules regarding wage assignments?
- Does the provider comply with state law requirements regarding wage assignments?
- Does the provider comply with state law regarding direct deposit?
For a more detailed list of questions to ask an EWA provider, download our EWA RFP Guide.
5. Doesn't involve pre-funding
When selecting an EWA provider, you don’t want to think about fronting the capital it takes to grant your employees their earned wages. It’s also wise to avoid the risk of creating a third party account to put your employees’ money in because as stated above, that method of “wage assignment” doesn’t comply with some state laws.
Unlike some EWA providers who adhere to these standards, Branch ensures there is no pre-funding or escrow required on your end to implement EWA—nor are there any third party accounts created. When you use Branch, we front the capital for all advances so you don’t have to, meaning you can offer a life-changing benefit to your employees at zero cost.
How Branch is leading the charge: Pioneers of free Earned Wage Access
Branch is proud to be a responsible steward of EWA. We were the first free earned wage access provider in 2019, and from the beginning have focused on providing a responsible, no-cost solution to employers and employees alike. The Consumer Financial Protection Bureau (CFPB) released guidance in 2020 that provides greater clarity on guidance for EWA providers and reinforced that the Branch EWA model aligns with best practices.
Branch makes it fast, easy, and free for your employees to access up to 50% of their earned wages ahead of payday. Learn more about earned wage access, or request a demo to see for yourself.