Most of us, especially if we work as employees, are used to being paid regularly once a month. However, a trend that has been spreading throughout the Western world for years is now catching on here too. Thanks to a relatively simple IT solution, it is possible to leave it up to each worker whether they wish to receive part of their earned money earlier.
They can do this even several times a month, if need be after every day worked. In an app on their phone or computer, they set the amount, and it is sent straight to their account. Advanto is establishing itself among Czech and Slovak companies with this so-called earned wage access. Will earned wage access become the new norm, as Advanto claims?
Behind Advanto and its eponymous app stand two co-founders: Martin Fortelný and Jan Kölbl. They met during university studies, at the end of which Fortelný came to Kölbl with the idea of creating an app that would allow people to withdraw their pay, or part of it, whenever they themselves wanted, instead of waiting for the regular payday. Kölbl soon programmed a basic version of the app and has been in charge of Advanto's technological development ever since. Fortelný took on the leadership role.
A meaningful benefit
Advanto launched at the beginning of 2020. Soon afterward, they secured millions from investors as well as their first employers, who put the new solution into live operation. "In hindsight, it turns out that Advanto came along at just the right time, because it solves a number of pressing problems for both employers and employees,” says Fortelný.
According to him, earned wage access is a benefit that, from workers' point of view, plays a decisive role when choosing a job or considering changing one. "Especially during the covid crisis, most employee benefits stopped making sense because they couldn't be used. Production was being scaled back and people started caring about what mattered most, which is instant access to their own money,” explains Fortelný.
HR professionals and experts confirm this. "It's a benefit that responds precisely to the most basic need of a huge group of employees. And that is their wages,” says Petr Otáhal, head of the Czech Association of HR Managers. According to Gerhard Knop of Leadership synergy group, from a worker's perspective, instant pay can even be more valuable than a higher reward paid once a month. "A fast reward is a double reward,” he claims.
Baťa was a pioneer
Being paid more often than once a month ultimately isn't anything new. "Baťa, for example, paid his people weekly,” Fortelný points out. "Employees were then more motivated and, above all, ran into financial trouble less often, because they had a better overview of their income and expenses. A month is unfortunately a long time. Colloquially speaking, right after payday people feel like millionaires, and then a week before the next payday they're short on money, and in extreme cases they take out loans,” Fortelný believes.
Data available to Advanto shows that app users withdraw an average of around two thousand two hundred crowns, three to four times a month. "To a certain extent, they are thus approaching, on their own, the model Baťa used to pay his workers,” comments Fortelný. However, he stresses that unlike in Baťa's time, it is entirely up to Advanto's users how much and how many times a month they withdraw part of their already earned pay.
Earned wage access as a safety net against debt
In Fortelný's words, for some people earned wage access can serve "just as a kind of safety net” for situations where, say, a week remains until payday and an unexpected expense comes up that can't wait. "Until now, people had to deal with unexpected expenses using overpriced loans, which is why so many people in the Czech Republic end up in debt enforcement proceedings. Yet it is surely better to cover sudden expenses, first and foremost, with money that is already mine and that costs me no interest,” explains Fortelný.
Employers cite protecting employees from financial problems as one of the main reasons they decide to introduce Advanto. "We faced the challenge of massive employee recruitment for a new plant in the Ústí nad Labem region. We wanted to use Advanto to diversify the range of benefits we offer and also to help our employees better manage financially during periods of potential financial hardship or increased cost of living,” says Gabriela Topková of SSI Technologies, one of a whole range of companies that introduced Advanto in spring 2022.
According to Fortelný, the energy crisis is showing up both in how Advanto's users behave and in increased interest from companies in rolling it out quickly. "After using Advanto, users can indicate what they need the money for, and since autumn 2021, energy and household expenses have consistently remained in first place,” states Fortelný. "Companies therefore want to help their people, at least through earned wage access,” he adds. The year 2022 thus brought the highest number yet of companies and people with access to Advanto. Well-known companies such as Hopi, Unipetrol, Notino, and Bageterie Boulevard were also added.
Advanto's revenue comes from a transaction fee of 49 crowns, paid either by the employer or the worker. It depends on the arrangement - some companies cover the first withdrawal of the month, and every subsequent fee is charged to the worker.
The end of wage advances and once-a-month pay?
Why did a once-a-month pay rhythm become the norm here in the first place? According to Fortelný, the explanation is simple. "More frequent pay is administratively demanding. During the communist era, the rhythm here settled on paying wages once a month, and it stayed that way even after the revolution. In the 1990s, the situation paradoxically got even worse, because both companies and employees started widely abandoning so-called wage advances, which represented extra administration. Once-a-month pay and optional wage advances are, moreover, strongly anchored in Czech legislation. But technology has long since overcome all the barriers that used to make more frequent pay impossible,” Fortelný emphasizes. "We have mobile internet, cashless mobile banking, and wages, attendance, and invoices are generally handled digitally. So everything can be connected and automated,” adds his colleague Kölbl, who is in charge of Advanto's technological side. "From the perspective of accountants or the employer's cash flow, nothing changes. If people withdraw money before the regular payday through Advanto, it comes out of Advanto's own funds. That is then settled with the employer once a month through automated IT processes,” he says. "What's more, setting up Advanto is turnkey, and we can even manage it in a single afternoon.”
As a result, among the companies that use Advanto, there are some that have abandoned bureaucratically demanding wage advances and replaced them with Advanto instead. "Employees themselves started showing interest in more frequent pay several years ago. Our system only allowed for one advance withdrawal per month due to the administrative burden. When we learned about Advanto, which handles all of that for us, the decision was quick,” says Lenka Kubánková, HR Manager at Fuji Koyo Czech. Eva Kyselová, HR Director at Lagardère Travel Retail, which operates Costa Coffee cafés, Burger King fast food restaurants, and the Relay newsstand chain, adds that, in her view, the privacy the app provides also plays an important role.
This article was published in the February issue of Sondy revue magazine in cooperation with the Czech-Moravian Confederation of Trade Unions.
