11 September 2020
Earned wage access: the most important payroll benefit in a post-Covid world
In the final instalment on earned wage access, we’re looking at how Covid changed our lives forever and how financial wellbeing will be crucial for employees everywhere as we emerge from the pandemic.
The outbreak of Covid-19 has brought about great change. For the financial lives of working people, sustained reduction in wages has meant their financial resilience has suffered. Businesses looking for a speedy recovery need to provide direct and immediate assistance to help their workers rebuild.
The State of the Nation
More than half of UK consumers started 2020 carrying debt, and with UK households predicted to see a £45 billion fall in cash available for essential spending due to the outbreak, it’s clear that the extended period of economic downturn is set to have a significant effect on the financial resilience of staff.
Earned wage access and the future sustainability of your workforce
Financial worries are having a real impact on your employees when they’re at work, even though they may not be at work in the traditional sense. A PWC survey found that 48% say that their financial worries are a distraction at work and 54% say that financial worries are the biggest stress factor in their lives.
Earned wage access provides a powerful way in which employers can overcome these stresses and protect the future sustainability of their workforce.
The way in which employees are paid hasn’t seen innovation for decades; the majority of workers across the world are still paid monthly, leaving many financially exposed and unable to plan for the future.
The feast and famine effect of the monthly pay cycle means, on average, that 43% of disposable income is spent in the first 24 hours of payday (Portifina), exposing 3.1 million people in the UK to payday lenders every year (FCA Financial Lives Survey).
Through earned wage access, employers can disrupt this negative cycle and have a real positive impact on, not only their employees’ lives, but also on their business.
More and more organisations are now waking up to the importance of earned wage access. A study by Gartner suggests that, by 2023, 20% of businesses in the US who pay the majority of staff hourly will deploy flexible earned wage access solutions (Gartner Report: Empower Workers and Energize Your Employment Value Proposition With Flexible Earned Wage Access, July 2019), leaving the UK behind in terms of pay innovation.
A recent report by The Resolution Foundation outlined that ‘the huge growth in payday lending, indicates that when workers are paid can matter’ and that ‘workers should have the right to choose how regularly they get paid’. With Chancellor Rishi Sunak set to look over a plan put forward to let workers draw pay as soon as they’ve earned it, earned wage access schemes may become a requirement moving forwards.
Missed the first two articles in the earned wage access series? You can read them below: