In part 2 of our comprehensive guide to Earned Wage Access in South Africa, we unpack some of the common misconceptions of EWA, and learn what steps you should take to choose a provider.
Payday loans are credit products that extend credit against an employee's next paycheque, often at exorbitant rates.
Early Wage Access is NOT a credit product.
EWA is a company benefit that significantly lowers the cost to employees to access emergency funds and is designed to help get employees out of debilitating debt cycles.
For example, where payday loans can cost employees 20% in interest, EWA via Jem HR comes at a significantly lower cost – only 3.5% plus a flat fee of R6 (standard) or R25 (instant access to funds).
An employee withdrawing, say, R500 in a standard payout pays 3.5% of R500 = R17.50, plus a flat fee of R6, totalling only R22.50 – much more affordable than a personal loan rate (20%, so R100 fees on R500!) or loan shark rates (40%, thus R200 on R500!).
EWA allows employees to access their own earned wages without creating additional debt, whereas payday loans often trap borrowers in a cycle of debt due to high repayment terms and fees. With Jem, employees repay the accessed amount with their next paycheck, preventing any long-term debt accumulation.
This is not true. Studies show that EWA can lead to better financial planning, with 72% reporting they “feel more in control” of their finances with an EWA benefit, allowing them to better manage emergencies without falling into debt.
Many employers worry about the costs and implementation of EWA. In reality, the cost of integrating EWA is often outweighed by the benefits, such as reduced absenteeism and improved retention and productivity.
In fact, with EWA by Jem HR, there is no cost to the employer whatsoever.
Jem HR will continue to release ongoing research, data and thought leadership covering all aspects of Earned Wage Access. Visit the Jem HR Knowledge Hub to dive deeper into the latest topics.