This article provides an overview of InstaPay transactions from the payroll administrator perspective to help answer questions around how InstaPay transactions are accounted and paid.
This article covers the following topics:
- The seamless salary advance
- How to offer InstaPay to your employees
- When can't employees use InstaPay
- Fees & definitions
- Following the flow of funds
- InstaPay payroll reporting
The seamless salary advance
Before InstaPay, providing a salary advance required employers to administer and track the process-- often including several manual workarounds by the payroll manager.
With InstaPay, Employment Hero has removed the administration work by leveraging the automated payroll technology of our platform. In short, InstaPay offers employees an easy salary advance option using earned wages, without causing the payroll administrator any extra work.
Another important note about InstaPay is that it also requires no up-front payments to be made by the employer. InstaPay transactions are funded by Employment Hero when requests are made, and repaid to Employment Hero later when the pay runs are paid. For details, see Following the flow of funds below.
How to offer InstaPay to your employees
Employers subscribed to Employment Hero HR + HeroPay are able to use InstaPay, and should have access by default. The service is part of our WorkLife suite of products designed to improve the overall employment experience.
Employees of InstaPay enabled organisations can make InstaPay transactions via the Employment Hero mobile app, available for free on iOS or Android. To change your opt-in/out status, please send us a request here.
If your organisation is currently using Employment Hero HR, but not HeroPay, and you'd like to be contacted about adding HeroPay & InstaPay-- you can let us know here.
When can't employees use InstaPay?
Employees must be active on the HR platform and employed by your organisation for at least 90 days (from company start date in the employee file). Employees with future termination dates set are not eligible to use InstaPay.
Employees are also unable to request InstaPay on leave days.
Fees & definitions
InstaPay is Employment Hero's exciting new feature designed to give employees access to their wages in real time. For more, see InstaPay FAQs. It's also important to note that InstaPay is not a loan-- it's an advance on an employees earned wages, and only a flat fee of $2 is paid by the employee per transaction.
Following the flow of funds
This section details the steps that occur to complete an InstaPay transaction starting from the employee's request, and ending with how funds are repaid to Employment Hero.
Steps in an InstaPay transaction
An employee withdraws a portion of their earned wages via InstaPay inside the EH mobile app
- Employee chooses the amount they wish to advance, which can be any amount up to their available balance. For more about how this is calculated, see How is 'InstaPay Available' calculated.
- A $2 fee is also charged to the employee per transaction.
- The InstaPay funds are then sent from Employment Hero to the employee's nominated bank account after the request is finalised.
- A locked bank account is also automatically created in the employee's HeroPay file.
- A deduction for the total InstaPay transaction amount (advance to employee + $2 fee) is also automatically created in the employee file. This deduction directs the InstaPay total transaction amount to be paid back to the Employment Hero account that originally funded the advance.
- When you create your next pay run, the transaction will be included for the employee as a post-tax deduction. An example deduction from a pay run is shown below.
- Lastly, the funds are paid back to Employment Hero when the pay run is finalised and the bank file is paid by the employer.
- InstaPay transactions populate in the pay runs as post-tax deductions
- Your pay run's total payment amount in the ABA file = net earned wages + *post-tax deductions + any other pay items
- InstaPay available = earned but unpaid wages. InstaPay available is based on approved timesheets, or a prorated daily amount (for each work day) for salaried employees. How is 'InstaPay Available' calculated.
- InstaPay is not available on the Paid Date as indicated by your generated pay run
- Employees must be active, have no termination date set, have been employed at least 90 days, and not on leave when they are attempting a request
*please note this if you typically use net earnings to reconcile with your ABA banking payment
InstaPay payroll reporting
The post-tax deduction type created in employee files when InstaPay transaction occur are called EH InstaPay Post-tax deductions. If you would like to report on these transactions, you can use the payroll Reports tool in Reports > Deductions Report. Just be sure to filter the deduction category to EH InstaPay Post-Tax deduction.
Please note: InstaPay transactions are included in the general Post-Tax Deductions column in the pay run totals.
Helpful resources for employees
We've created a few resources to help employees understand how to use InstaPay, which can be found below.
You can also direct employees with technical support issues using InstaPay to our Employee Technical Support Form.