Most wage earners worldwide receive their wages digitally – into a financial institution account, a prepaid or payroll card, or a mobile money account. However, access to and benefits from digital wage payments are unevenly distributed.
A brief by the International Labour Organization (ILO) outlines factors that determine the extent to which the benefits of digital wage payments can be realized.
Digital wage payments that respect relevant principles and guidelines are beneficial to workers, enterprises, and governments. The benefits of responsible digital wage payments to workers include improved access to social security and formal financial services and better control over time and money. Workers paid digitally can avoid the risks of carrying physical cash and be better protected against the insolvency of employers or financial service providers.
Employers can also reap benefits from digital wage payments, as demonstrated by several case studies. These advantages include saving time and reducing errors that may arise from paper or cash-based wage payouts.
The transparency provided by digital wage payments can enable governments to improve compliance, address issues related to tax and social security evasion, and resolve disputes between employers, workers, and financial service providers.
The brief asserts digital wage payments should be designed and implemented responsibly to contribute to social justice and decent work. The following are issues to be considered when implementing digital wage payments in order to reap their benefits fully.
Choice of digital means of wage payment, financial service provider, and financial products. Employees are advised to make decisions regarding digital wage payment, financial service providers, and financial products. These decisions may be influenced by legal requirements, collective agreements, or individual agreements through arbitration.
Accessibility and security of income and assets
Wages should be paid in legal tender and at regular intervals that minimize the likelihood of indebtedness among workers. Workers should be protected from arbitrary, unfair, or unforeseen decreases in their remuneration.
Responsible digital wage payment solutions that enable employers and workers to have affordable and convenient ways to view, access, use, and withdraw their funds on demand should be developed. In addition, relevant information, control, and protection mechanisms should be in place to protect workers’ and employers’ deposits, savings, and other similar financial assets. For instance, a national deposit insurance system can protect financial assets in the event of the insolvency of the financial service provider.
Transparency: Employers should provide itemized wage statements (payslips) to workers, including the gross and net wages earned, and the reason for and amount of any deductions that may have been made. Financial service providers should provide appropriate information about financial services and products.
Privacy: Employers’ and workers’ financial and personal information should be protected through appropriate control and protection mechanisms.
Fair opportunities and treatment: Digital wage payments should be designed and implemented in a way that promotes equal remuneration for work of equal value, non-discrimination, conciliation of employment and family responsibilities, and protection from violence and harassment.
Enabling conditions: infrastructure readiness (support services, reliable energy, telecommunications, interoperability between payment systems, and physical access points); capacity of enterprises and workers; and conducive policy, legal, regulatory, and supervisory environment.
Read the full brief here.