Earned Wage Access (EWA): A New Challenge for Accountants and Finance Professionals in Georgia

Earned Wage Access (EWA): A New Challenge for Accountants and Finance Professionals in Georgia 

What Is EWA 

Earned Wage Access (EWA) is a tool that allows employees to receive part of the salary they have already earned, but that has not yet been paid, before the agreed payday. As a rule, only a certain percentage of earned wages is available (often 30–50%), and the remaining balance is paid on the regular payday, net of the amount already received. 

Two main models are common in international practice. In the employer-integrated model, the employer introduces the service: it either funds early payments itself or uses a provider that is connected to its payroll and time-tracking systems and recovers the amounts paid out from the employer on payday. In the direct-to-consumer model, the app operates without the employer's involvement: it estimates the employee's income from bank account data and automatically recovers the amount advanced when the salary is credited. 

The legal nature of EWA is not uniformly defined worldwide. Proponents argue that employees are receiving their own money that they have already earned, not an interest-bearing loan. However, in some jurisdictions, particularly the United States, regulators' positions have changed more than once, and several states have adopted specific laws for this service. As a general trend, the free, employer-integrated model is less likely to be treated as lending, while models based on fees and automatic repayment more often fall under credit regulation. This distinction drives the accounting, tax and regulatory consequences that follow, including in Georgia, where payroll accounting and taxation practice is largely built around a once-a-month payment model. 

Why This Matters in Georgia 

From a technological standpoint, implementation is relatively straightforward: integration with a payroll or time-tracking system and a mobile app are sufficient. However, Georgia does not yet have a specific regulatory framework for EWA. This means that any implementation must fit within existing general rules: the Tax Code, the Law on Funded Pensions, the Labour Code, financial services regulation and personal data protection legislation. Below we discuss the key questions an employer should answer before implementation. 

Accounting Considerations 

The first question to decide is whether early payments are funded by the company itself (self-funded) or by an external provider. 

Under IAS 19 Employee Benefits, the expense and corresponding liability for short-term employee benefits are recognised in the period in which the employee renders the service. Since EWA relates only to wages already earned, in the self-funded model an early payment essentially represents a partial settlement of a salary liability that has already arisen. In practice, if a company accrues salaries only at month-end, an interim payment may temporarily be recorded as a salary advance and offset against the salary liability at month-end close. What matters is that balances are properly reconciled at the reporting date and that the expense is recognised in the correct period. 

In the provider model, the employer incurs a liability to a third party (the provider), which is settled on payday. In other words, part of the salary liability becomes a liability to the provider rather than to the employee, and should be recorded in a separate account. The provider's service fee should also be assessed separately: if the employer pays it, it is an operating expense of the company; if the employee pays it, it is the employee's personal expense and does not reduce the taxable amount of salary. 

Personal Income Tax and Timing of Withholding 

Under the Tax Code, the employer, acting as a tax agent, withholds 20% personal income tax on salaries at source. Withholding is linked to the payment of salary, not to its accrual or the close of the payroll period, and the tax withheld must be transferred to the budget at the time the payment is made (while returns are filed monthly). Accordingly, in the self-funded model each interim payment is treated as a separate payment, from which personal income tax and pension contributions must be withheld and transferred at that moment. Compliance with withholding and payment deadlines is essential, as breaches result in tax penalties. In practice, this means the system must calculate the gross amount, deductions and net pay for every payment. 

The provider model is more complex. If the provider pays the employee from its own funds, the question arises as to when the salary is considered paid: when the provider transfers the funds, or on payday, when the employer settles with the provider on the employee's behalf. The answer depends on how the contract is structured (payment on the employer's behalf, assignment of a claim, or financing of the employee) and directly determines the timing of withholding. Before implementing such a model, it is advisable to carry out a tax analysis of the contractual structure and, where necessary, to obtain an advance ruling from the Revenue Service. 

Pension Contributions 

Under the funded pension system, the employee's 2% and the employer's 2% contributions are calculated when remuneration is paid, while the state's contribution depends on the employee's annual income. Accordingly, contributions must be calculated at the time of each interim payment. It should also be borne in mind that the employee's 2% contribution reduces the personal income tax base, so the calculation sequence (pension contribution first, then personal income tax) must be applied correctly for each payment. Otherwise, the monthly totals may show double or incomplete calculations, or rounding differences. 

Cash Flow Management 

If the programme is self-funded, the company needs to have a significant portion of the payroll fund, together with the related taxes and pension contributions, available earlier than in the standard cycle. This affects cash planning and the short-term liquidity buffer. In the provider model, the liquidity burden shifts to the provider, although its cost is usually borne by the employer or the employee in the form of fees. 

VAT and Licensing 

In the provider model, it is the provider's service fee that needs to be assessed for VAT purposes, since salary itself is not subject to VAT. The VAT treatment of the fee depends on the nature of the service. 

As for licensing: if the provider funds employees from its own resources and subsequently recovers the amounts, it should be assessed whether this activity falls under the regulation of lending to individuals. In Georgia, such activity may be carried out on a professional basis only by entities supervised by or registered with the National Bank of Georgia (banks, microfinance organisations, loan-issuing entities, etc.), and the Civil Code sets caps on the effective interest rate and on penalties. If the provider moves funds between the employer and employees, registration as a payment service provider may also be required. A self-funded, free-of-charge model, by contrast, is generally treated as a partial payment of salary and does not raise licensing issues. 

Compliance with the Labour Code 

The Labour Code sets a minimum frequency for the payment of remuneration (at least once a month), which allows for more frequent payments. Accordingly, the rules and conditions for using EWA should preferably be set out in the employment contract or internal regulations. In the self-funded model, the remaining part of the salary is paid and the month's final settlement is made on payday. 

If the amount owed to the provider or its fee is recovered through deductions from salary, such deductions require a legal basis, namely the employee's individual written consent (in the employment contract or a separate agreement). It should also be verified that total deductions do not exceed the limits established by law, and it should be determined in advance how settlement will take place if the employee terminates employment before payday. 

Personal Data Protection 

In the provider model, the provider receives employees' payroll, working-time and bank account data. Under the Law on Personal Data Protection, in force since 1 March 2024, the transfer of such data requires a legal basis, a written agreement with the processor and notification of employees. If the provider or its servers are located abroad, the rules on international data transfers also apply. 

Conclusion 

EWA is a technologically simple tool that is attractive to employees; however, implementing it in Georgia today requires a considered interpretation of existing rules (the Tax Code, the Law on Funded Pensions, the Labour Code, financial services and personal data protection regulation, and IFRS) for a new, non-single payment model. No ready-made answer yet exists in any legal act, so before choosing a model and setting up systems, a comprehensive assessment of the tax, accounting and legal issues is essential. In the near future, we aim to share a practical action plan for implementing an EWA model. 

This article is for general information purposes only and does not constitute legal or tax advice. Please consult a specialist before making any specific decision.