What is a salary advance?
A salary advance, also known as earned wage access (EWA), lets you access a portion of your wages before your official payday. Your employer must be signed up to a salary advance scheme and you’ll typically pay a fee to access the money.
It’s important to note that a salary advance isn’t extra money. You’re just getting a percentage of your salary before payday.
How does advancing my salary work?
There’s no chance of you not paying back your salary advance – as it’s subtracted from what you get paid on payday – so it’s not counted as credit and you don’t pay any interest.
Here’s how a salary advance works:
Your employer must be registered with a salary advance provider. If it's not, a salary advance won’t be available to you.
You can see how much cash you can access through the salary advance provider’s app or online portal. Typically, you can access up to 50% of what you’ve earned during the particular pay period. There may be a cap on how often you can use the service each month.
You choose the amount you want to take and pay a fixed fee for each withdrawal – usually £1-£2 per advance. The provider transfers the funds directly to your bank account within 24 hours.
On payday, your employer repays the salary advance provider (plus the fee) and you get the rest. Normal deductions, such as tax and National Insurance, still apply.
Is a salary advance a loan?
No, a salary advance isn’t a loan. Unlike loans, which involve borrowing money and repaying it over time with added interest, a salary advance lets you access money you’ve already earned.
Is a salary advance a good idea?
Taking control of, and managing, your finances is way better than relying on salary advances. But if waiting until payday just isn’t an option for you, then a salary advance can help with:
A sudden, unexpected expense
An emergency situation.
Remember that a salary advance isn’t extra money. You’re simply getting your hands on a percentage of your salary before payday. This means you’ll have less than usual when payday comes around, so careful budgeting is essential.
If you’re already struggling with debt, taking a salary advance is unlikely to be a good idea and could make your financial situation worse.
If you’re having problems managing your finances, you can get free, expert debt advice from trusted services such as MoneyHelper, Citizens Advice and National Debtline.
Our guide on how to get out of debt can also help you start getting on top of your finances.
Pros and cons of salary advance
Advantages of salary advance
Immediate access. Provides quick access to funds, sometimes within minutes, to help you cover an emergency or unexpected expense.
It won’t affect your credit score. A salary advance isn’t counted as credit as it’s automatically deducted from your salary on payday.
You won’t be charged interest. Unlike an emergency loan, for example, salary advances don’t incur interest.
Disadvantages of salary advance
You’ll get less money on payday. This means you’ll need to do some careful budgeting to ensure you’re covered until your next payday.
You’re charged a fee per advance. You’ll typically pay £1-£2 each time you use the service.
Salary advance is unregulated. Because salary advances aren’t loans, they don’t have to be regulated in the same way. This means you can’t complain to the Financial Ombudsman Service if things go wrong, as you would with a regulated firm.
Salary advances aren’t reported on your credit file. That means if you’re applying for credit, other lenders won’t be aware that you’ve taken a salary advance and may give you credit when you really can’t afford to be taking it. So it’s largely down to you to be sensible with this.
Is a payroll advance taxable?
Yes, you’ll pay the same tax and National Insurance contributions on a salary advance as you do on your regular wages.
How does a salary advance appear on my payslip?
A salary advance, plus fee, will be shown on your payslip as a deduction after tax. This means your take-home pay will be reduced by the amount of the advance and the associated fee.
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