Dangers of accessing your salary before pay day
CASH-strapped employees are being offered access to their salary well before pay day but financial counsellors have warned it could do more harm than good.
Earnd and InstaPay are among the services allowing workplaces to offer staff access to portions of their salary as they earn money it.
The services has been rolled out across dozens of industries nationally.
Using Earnd employees can access up to 50 per cent of their pay before payday and the amount owing is automatically deducted from their salary come payday.
While InstaPay allows users to access between $100 and $250 per week and users are restricted from using it more than three times consecutively.
Ironically, the Consumer Action Law Centre who provide free financial counselling services - said they were offered the InstaPay service allowing their staff to access their salary as they earn it.
CALC's chief executive officer, Gerard Brody, said he ceased dealing with the firm when he learned they offered this and said it could leave employees in financial hot water.
"I was horrified that our staff were being offered this service," he said.
"Getting your pay earlier puts your financial difficulties off to another day.
"For example if you get 50 per cent of your pay earlier you may not have enough money to pay your rent come payday."
Earnd has two fee structures, one where an employer offering the service pays a fee, or a fee is shared between the employer and employee.
This fee varies but an employee will pay a transaction fee of $1.75 per withdrawal.
Whereas InstaPay charges a customer a $2 fee each time an employee use their service.
Earnd is backed by National Australia Bank Ventures.
A NAB spokeswoman said they were "impressed" with Earnd's offerings including allowing employees instant access to their pay.
Employment Hero - the firm which offers InstaPay's - chief executive officer Ben Thompson said it was a cheap alternative that allowed staff to access their wages as they earn them.
"This is the cheapest last resort for someone who needs access to their own money," he said.
"This is an employee accessing money they've already earned for emergency reasons and it's the cheapest form of access to funds they could get."
But Mr Thompson said they did not know how employees used their fund and whether it was for an actual emergency.
However, Financial Counselling Australia's chief executive officer, Fiona Guthrie, said these services prey on those struggling to manage money.
"There's a potential that it might be a short-term fix but make it worse in the long term," she said.
"It could result in people continually getting caught short trying and play catch up."
Earnd's co-founder Josh Vernon said their aim "is to provide income to individuals that they've accrued as they accrue it."
"It removes the individual's dependency of being paid on a certain date."