Workforce Bulletin

On November 21, 2024, legislation will take effect in South Carolina, making that state the latest jurisdiction to regulate earned wage access (EWA) programs. EWA programs are generally targeted towards lower-wage earners, allowing employees to obtain a portion of their paycheck before the employer’s scheduled payday. While EWA can be a lifeline for employees living paycheck to paycheck, consumer advocates worry that hidden and not-so-hidden fees associated with such programs could increase users’ aggregated debt, to the detriment of their long-term financial well-being.

To combat such concerns, states have begun to implement rules requiring employers and third parties offering EWA programs to abide by certain standards. States differ, however, on whether payroll advances though EWA programs should be treated as loans. Categorizing EWA advances in this way obligates employers and third-party providers to abide by a complex set of banking regulations. Thus, it is important for employers that offer or are considering an EWA program to understand the implications, which vary depending on the states where the employer does business.

How EWA Programs Work

Advances under EWA programs are either provided directly by employers as a benefit to employees or by third-party providers directly to consumers. If an employee opts to advance a portion of their paycheck through an employer-provided program, the employer or payroll provider reduces the subsequent paycheck amount on payday to recover the advance. If an employee enrolls in an EWA through a third-party provider, the provider removes the advanced amount from the employee’s direct deposit account on payday.