What is Earned Wage Access? How Can It Benefit Employers & Employees in Malaysia?

Disclaimer: This article should not be considered to be legal advice, and altHR is not liable for any actions taken based on this article.

With discussions around minimum wage in Malaysia a regular hot topic, financial accessibility remains a significant concern when it comes to workers in Malaysia — particularly when it comes to employees who may require short-term liquidity or immediate cash flow due to unforeseen circumstances. 

One way that this issue can be mitigated is Earned Wage Access (EWA), commonly referred to as instant pay, accrued wage, or on-demand pay. While this does not necessarily solve certain problems such as the high cost of living, EWA is a financial service that can be a solution to cash flow issues, offering better financial accessibility to employees in Malaysia. 

What is Earned Wage Access (EWA)?

Earned Wage Access is a financial payroll solution that offers employees access to their earned wages before the regular payday. For example, an employee earning a monthly basic salary of RM4,000 would be able to withdraw up to RM2,000 at the midpoint of the month — accessing a portion of their monthly wages that has already been “earned”. 

Still a regularly new concept in the HR world, EWA offers a number of significant benefits to both employers and employees — basically allowing for salary advances without the former having to front the costs from working capital.

How can EWA help employees?

Findings show up to 89% of Malaysian youth pay bills late, primarily due to limited cash on hand. This can lead to issues where a significant number of Malaysians (up to 28%) borrow to buy essential goods such as groceries — with many Malaysians (up to 75%) not holding savings of more than RM1,000. 

EWA helps employees by offering access to short-term liquidity, which also reduces the need for emergency loans — which can be associated with high interest rates and risk, depending on the source of the credit. This means more financial control by employees over their finances, less reliance on credit facilities (such as credit cards, bank overdrafts, etc.), and less financial stress with more access to emergency funds and financial security.

How can EWA help employers?

Employers who implement EWA solutions also stand to benefit in a number of ways, provided they are engaged with the right provider. Essentially, EWA means that employers will be able to offer advanced salary payouts — without having to front the costs of said payouts from their working capital. 

This, of course, is dependent on the EWA provider they’re engaged with, but findings show that the availability of Earned Wage Access can result in a reduction of employee turnover of at least 16% — thereby eliminating the potential cost of rehiring new staff which can cost up to 33% of an employee’s salary per annum.

These measurable impacts on the business only serve to show that EWA — when implemented well — can have a positive change on the overall business.