Employers in the UK offer employees earned wage access (also known as on demand pay) as a benefit. Nearly a third (33%) of employees in industries that depend on shift workers, such as care, retail, and hospitality have access to this service. Many of the nation’s largest employers, such as Capita and Tesco, ASDA and Carpetright, have access to this service.
Financial inclusion is an aspect of the benefit that gets little attention in the media. Let’s put aside the benefits for employers, such as filling shifts or reducing staff turnover. Instead, focus on how technology can help staff overcome barriers. It’s especially important for those in need.
Financial flexibility
In the past, shift workers in the UK received weekly pay, while salaried employees were paid on a monthly basis. This has changed. Since the early 2000s the share of weekly-paid workers has been halved. This is primarily due to the migration of shift workers away from weekly pay and towards monthly pay.
This move, while incredibly beneficial to employers in terms of reducing administrative costs and streamlining payroll, hasn’t been so good for employees, particularly those with the lowest incomes.
In the UK, in 2000, the half of the lowest paid workers still received weekly. This figure has dropped to below 20% today and is still on a steep decline.
It is important because, when unexpected expenses occur, those who have the least savings will now wait up to four time longer for their next paycheque. The growing list of direct deductions can be made at any time during the month. However, the cash infusion is only given once per month. Budgeting becomes more difficult and debt is more appealing.
The UK’s most financially insecure cohort has seen their pay become less flexible
A widening gap between work and pay
The gap between the work and pay of these workers is widening, and many are falling through.
Markets have responded to this gap by creating a variety of risky, expensive and debt-based solutions. There are a number of solutions, including buy-now, pay-later, increased use of overdrafts and payday loans, as well as a variety of rebranded cards.
Summary: Pay has become less flexible, especially for those who are financially unstable. This has led to the development of new services, which provide flexibility, but at a price. The cost of this is high-interest loans, which in turn make these workers less stable financially, creating a “doomsday loop” that increases demand for these services.
Flat-rate ATM fees for access to earned wages
The Earned Wage Access allows employees to withdraw their earnings before payday without incurring debt, and this does not impact the cash flow of their employer. They simply log in to an app after their shift or day of work and withdraw a part of their wage. The payroll continues to run as usual, but staff’s financial well-being can be improved.
The earned wage access allows staff to quickly access cash when they need it. However, unlike a loan, this service does not charge interest. On-demand pay providers usually offer a transparent and simple fee structure. Most providers charge a flat fee, similar to an ATM withdrawal, of less than few pounds. This means that employees will know exactly how much they are paying for the service.
Each employee will be charged the same amount, regardless of their credit history, withdrawal reason, or amount being withheld. How? Staff can only access the money they’ve already earned. It is a more cost-effective way to access money when you need it, especially if you compare it with debt.
Employers can reduce the risk that their employees will fall into debt cycles by providing them with a debt-free, high-quality alternative to credit.
The access to earned wages is NOT a debt
This flat fee is not only cheaper, but it’s also better because there is no debt involved! Workers know what they will pay, unlike interest. This number can’t increase, can’t fluctuate based on the circumstances, can’t spiral into debt, and can never be delayed for credit checks.
It is available to all staff members, from the CEO right down to the lowest paid employee. This is a unique product, as most financial products cost the lowest-paid employees more while the highest-paid employees pay less.
Employers can reduce the risk that their employees will fall into debt cycles by providing them with a debt-free, high-quality alternative. In fact, 88% users of the earned wage access benefit have stopped using short-term debt with high interest rates.
Employers have a role to play
Your employer must offer this benefit to employees. If the company who pays your wages does not have it, you cannot access it. There are no exceptions.
Many workers, especially those in the NHS and care sectors, have to choose between working for an employer that offers on-demand payment or taking on expensive debt.
As this service becomes more common in the UK, payroll and HR departments have a moral and commercial obligation to provide it. If you don’t, it will affect your company’s ability in the near future to motivate and hire staff. How You Pay is now as important as What you pay.
Offer a lifeline
Earned wage is a powerful way to promote financial inclusion and break down barriers that keep employees from reaching financial stability.
You are providing a lifeline by allowing immediate access to your earned wages. You eliminate debt risks and provide financial flexibility. On-demand pay is becoming a popular employee benefit strategy for many employers, including the NHS and Capita plc.
