Here’s a thought experiment. You’re a blue-collar worker working the assembly line of a large well-established company. Money is tight but you’re getting by, as long as the leaky roof of your house holds up and your sputtering motorcycle doesn’t break down. You certainly wouldn’t be able to lend anyone money. Yet every month, your company borrows money from you.
Crazy, right? But that happens to most workers because of how the payroll cycle works. 80% of workers live paycheck to paycheck, while funding the working capital cycle of their employers. In other words, employers are able to benefit from two weeks to a month of labour before paying out wages, which also allows them to use the money for other things in the meantime.
Employers aren’t evil — it’s just that there is always a risk that workers might vanish after being paid in advance, and the option of paying wages daily would be an enormous (and expensive) administrative nightmare. Unfortunately, this results in a workforce that lives paycheck to paycheck, where unexpected life hiccups become financial catastrophes. Consequently, an entire ecosystem has evolved to serve workers like you: OG loan sharks, digital cash lenders, salary loan providers, P2P lenders, and so on. They all have something in common — they’re all looking to lend you money.
But you have money that belongs to you! It’s yours, just locked up in your employer’s payroll system. That’s where companies like wagely come in. wagely fronts the money and gets paid back when payday arrives.
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Written by Jennifer Ho, Principal at Integra Partners and Theodore Ng, Analyst at Integra Partners. Illustrated by Theodore Ng,.