Insecure work, such as zero-hours jobs and gig working, is on the rise and, in the UK alone, 3% of the working population uses a high-interest, payday loan to cover the weekly food shop for their family. Advance pay offers a practical solution to help employees get back in control
Meet Linda. She juggles being a mother of two with work. To make ends meet she is one of the more than one million workers in the UK holding down multiple jobs.
During the day she works in a food retailer. At the weekends she does shifts in a local pub, though this is on a zero hours contract so she’s never quite sure when she will work and what she will earn. When she has put the children to bed for an evening, she sits down to a bit of knitting. Thanks to encouragement from her friends, she has started to sell some of her knitted hats through an online marketplace.
Even working flat out, it’s hard to pay the bills by the end of the month. So, a few months ago she turned to a payday lender – and now she’s getting further into debt. If only she could access her wages more regularly, rather than have to wait a full month.
Well now she can, thanks to a new service that re-establishes the link between work and financial award through enabling employees to access their earned income at any time during the monthly pay cycle.
Global payroll and HR services provider SD Worx is the first payroll company to provide an employee benefit solution like this, called Advance Pay. Both salaried and hourly paid employees can track their earnings in real-time through a simple-to-use app. They can select how much of their earned salary they want to withdraw at the touch of a button and get it into their current account instantly.
The best bit for employers is that there are no set-up costs, no changes to the usual payroll or timekeeping processes and integration is easy. The drawdowns are reconciled with the employer’s normal payroll cycle. The only cost is a small £1.75 fee per transaction, payable either by the company or employee.
For Linda, this type of solution would make all the difference. She remembers her gran telling her how she used to handle the weekly bills back in the 1960s. Then, three out of four of those employed in England and Wales were manual or clerical workers and 69% of these were men. All across the nation these menfolk would come home on a Friday night and hand over their weekly cash pay to their wives. The wives would take the money for all the household bills and return a little ‘beer money’ to their husbands.
Today only 13.6% of jobs are paid weekly, according to the Office for National Statistics’ Annual Survey of Hours and Earnings 2017 (ASHE). Just under one in 10 of us is paid every four weeks but more than three-quarters are paid a monthly salary into their bank.
Combine this with the growth of insecure work, such as zero-hours jobs and gig working, and it is no surprise that debt charity StepChange found last year that more than one million people in the UK rely on high cost credit to cover the cost of essentials.
In other words, 3% of the working population in the UK uses a high-interest, payday loan to cover the weekly food shop for their family at the end of the month or have to use a rent-to-own store to replace broken white goods, such as a fridge or cooker.
But that’s not the total story. It’s not just those on lower wages who suffer from financial worry. According to the Chartered Institute of Personnel and Development (CIPD), one in four workers say money worries have affected their ability to do their job. Nearly one in five have lost sleep worrying about their finances – and there is plenty of evidence that shows the impact this has on productivity and physical and mental wellbeing. Over a quarter of employees felt less financially secure in 2017 than in 2016, says the CIPD research, and 30% state money worries have caused them stress.
And it’s not just the UK that is seeing increased stress and mental illness in workers arising from financial concerns. According to a recent report in the Financial Times, in spite of upbeat economic statistics in the US, “money worries pervade the country. Psychologists rank personal finance as among the biggest sources of stress, alongside health concerns and personal relationships”.
This lack of financial wellbeing is a lose-lose situation. Employees are anxious, stressed and vulnerable. There’s a clear impact on employers’ bottom lines. For every £1 million an organisation spends on payroll, it is estimated that it loses 4% of productivity due to poor employee financial wellbeing (Barclays 2014). In retail alone, stress attributed to concerns about personal finances cost the industry an estimated £7 billion because of employees taking time off work and 1.7 million hours are lost through employees taking time off because of financial stress (Neyber 2016).
Then there’s the impact of financial stress on employee behaviour, concentration and productivity. A financially-stressed employee is unable to be the best person they can be in work.
Business conversations around financial wellbeing have been growing over the past five years as companies realise they can play a role in helping their staff, through education programmes, confidential counselling services and reward programmes. Nine out of 10 (91.8%) HR and reward professionals believe that a financial wellness strategy is best delivered by an ongoing programme of financial education, combined with access to appropriate employee benefits, according to research from organisations employing 1,516,733 UK employees unveiled by financial wellbeing consultancy Nudge in The Financial Wellness Playbook 2018.
While these are indeed positive steps forward, they do not deal with the immediate concerns of someone who has run out of money to buy food a week before payday. A more practical solution is needed, and Advance Pay is one way to fill that gap.
“With personal finance worries being cited as one of the biggest causes of employee stress, the option of being able to offer employees the ability to access their earnings using a simple-to-use app, at any time, will help employers offer a practical solution to alleviate some of these financial concerns,” says Melissa Goddard, chief product officer at SD Worx.
Fully HMRC compliant, Advance Pay is also a clever recruitment, retention and engagement tool. After all, who wouldn’t want to choose an employer who can facilitate more regular payments over one who can’t? And if you rely on employees volunteering for shift work, the idea they can be paid immediately will likely result in a queue forming for that work!
If you’re concerned about cashflow or too much complexity, you need not worry. Companies can control what percentage of earned salaries are made available to employees. So, if you only want to enable an employee to access £100 a week from a £500 weekly salary, you can set that limit.
Innovations like Advance Pay give instant financial security to workers. It is a practical, measurable tool in an employer’s financial wellbeing armoury. But perhaps its main benefit is that it helps employees to feel back in control. For feeling in control empowers employees to make decisions that move them forward – and that can only be good for them and for business.
According to the Chartered Institute of Personnel and Development, one in four workers say money worries have affected their ability to do their job