Interest groups and experts agree that while it gives workers financial flexibility, it also erodes their ability to save.
Getting a portion of your salary before pay day is now possible, but some have expressed fears that it can have a negative impact on savings.
The system, called earned wage access , has gained acceptance among employers, and it has given employees a breather when facing a difficult situation. MUI chairman and CEO Andrew Khoo said the 50% limit ensures that employees will not put themselves under financial strain.An employer interest group and a think tank expressed fear that such a practice could have a negative impact on an individual’s savings.EWA was first introduced in the US in the 2010s to help Americans who did not have access to credit or traditional banking. It was not until last year when Malaysian employees were given that option.
However, MEF president Syed Hussain Syed Husman also cautioned that failing to manage EWA with prudence could lead employees to spend more on non-essentials, eventually leading to reduced savings. “Apart from the financial flexibility there is no real benefit for employees. Companies will only use it as a gimmick to position themselves as a caring employer,” he said.“It can create a culture of indebtedness given that by the end of the month the employee will have spent most, if not all, of his earnings,” Solomon added.
“Who will make the money available in the employee’s bank account? Is the bank giving an advance?” he asked.Ferlito, who heads the think tank Center for Market Education, also agreed that it could erode savings.
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