Deon Nobrega, MD of Paymenow, says it's time for pay to catch up with today’s world.
By Deon Nobrega, Paymenow managing director
Employees have been trapped in a weekly or monthly wage cycle for as long as most of us can remember. This system is inflexible, and leaves employees little wriggle room when unexpected emergencies occur, or if they find they have too much month and too little money between pay dates.
This situation has been exacerbated in South Africa with the global financial crisis followed by the Covid-19 pandemic. Ongoing, rising unemployment is placing increasing financial pressure on people who are employed to support unemployed loved ones.
The latest quarterly labour force survey released by Statistics South Africa shows that unemployment has increased from 32.6 percent to 34.4 percent over the first quarter of the year. This means that 14.9 million South Africans are now unemployed.
Earned wage access (EWA) can offer a much-needed break to employees who are often the sole income earner in their families. Here’s how it works.
EWA is a service provided to employers. They sign up to allow their employees responsible access to earned wages, up to a fixed amount (usually 25 percent) of their monthly earnings. In other words, employees can draw the wages they have already earned during the month, up to 25 percent of their total monthly pay, and at month-end, they will receive the balance of their salary as usual.
The provider facilitates the payout for a service fee, which is substantially lower than the interest rates offered by formal banking institutions or informal payday loans providers.
Through incentivising employees to educate themselves financially by reducing their transaction fees as they progress through a carefully designed financial wellness journey, EWA can help employees move from a debt to a saving mindset.
From our conversations with our customers and users we know that on average, 50 percent of employees register for the service within the first 60 days and just over half transact twice a month. The average cash transaction is R350, while the average in-app value added purchase is around R30 for airtime, electricity, and grocery vouchers.
Often employees are short just R50 or R100 for food or transport and being able to easily and cheaply access this makes a major difference to their quality of life and reduces their stress levels significantly.
For employers looking to meaningfully assist their employees to get out of an endless debt cycle and offer them a benefit that can positively impact their lives immediately, EWA is worth investigating.
