EWA’s Direct Deposit requirements by some providers can potentially put the company’s payroll and employees’ paychecks at risk.
EWA, short for Earned Wage Access, has become one of the most sought-after benefits for employees. It gives them the ability to use their paychecks whenever they need them, as opposed to waiting until payday to meet their financial needs.
By offering EWA as a benefit to employees, employers can also help reduce financial stress and improve employee productivity and retention.
However, most EWA vendors, including my company, OrbisPay, focus on the benefits without discussing the risks or challenges associated with implementing the EWA program. As the EWA gains traction with employers, it is important for us, as EWA providers, to be transparent about how we manage EWA benefits. What are our processes and how do we comply with Federal and State wage laws?
It is critical that employers evaluate the EWA processing structure to understand the operational and legal risks associated with the EWA program.
How EWA is administered can potentially put employers’ payroll and employees' paychecks at risk
When the EWA vendor requires employees to set up new Direct Deposit accounts prior to using the EWA benefits. This can potentially put the employer’s payroll at risk. Consider some of the risks and pitfalls associated with Direct Deposit.
EWA’s Direct Deposit Risks
Employees are required to open new Direct Deposit bank accounts with the EWA vendor where the employee's pay will be forwarded. Employees already have bank accounts where they receive their pay. Why a new bank account?
EWA provider is now ‘responsible’ for pay disbursement which adds another layer/Risk. There's a chance the EWA vendor could mess up and put payroll at risk. We are not payroll companies that are responsible for distributing payroll to employees. This extra layer can increase the risk of payroll mismanagement.
Employers need to continuously update the payroll system with new Direct Deposit information for employees wanting to use or not use EWA.
EWA is an emerging industry, EWA providers can go out of business, potentially compromising employees' access to pay with Direct Deposit.
With Direct Deposit, employers have little control or insight into how the program works and,
Finally, employers should evaluate whether the EWA providers that deposit an employee’s earned wages into an account set up by the provider are in compliance with the state Direct Deposit laws.
How OrbisPay does it?
We, like other EWA providers, connect with the employer's payroll and Time and attendance systems to give them access to their earned wages. We use time and attendance data to calculate hours worked and convert them into available funds. Employees also need to connect the existing bank accounts they want to use. When they need funds, they can simply tap the OrbisPay app, and funds are transferred instantly to their bank accounts.
This is where we differ from other EWA providers. We do not require employees to set up Direct Deposit bank accounts with OrbisPay. Employees are free to use any bank they do business with. At the end of the pay cycle, we send a file to the employer for funds accessed by its employees. Employers gain full visibility on how the program is being utilized. They can review and upload the file to the payroll system. Employees receive the balance of the pay and employers return the funds that were used during the pay cycle to OrbisPay.
My company, OrbisPay, has one goal. Helping employees and workers to become financially resilient with inexpensive and easy-to-use financial products and services. We do not want to be a payroll company or act like a bank with Direct Deposit and debit cards. We built our processes to never touch paychecks and our employees' bank accounts try to be a jack of all.