In May, the CIPP hosted an online roundtable – sponsored by the Access Group – to discuss the emergence and development of this practice. This is the first of two  instalments reporting the discussion

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Particpants Jill Bonehill ACIPP, account manager, Marketing and Business Development, CIPP Abhishek Agrawal, director of EarlyPay, Access Group Anthony Cronin, chief executive officer and founder, Flexi Range Jason Butler, head of financial education, Salary Finance Jaspal Randhawa-Wayte, director of product management, Payroll Solutions, Zellis Samantha Mann MCIPPdip MAAT, head of policy and research team, and technical lead, CIPP Katie Duxbury, head of payroll services, BUPA James Herbert, chief executive officer and founder, Hastee Brian Sparling ChMCIPPdip, senior manager, Global Managed Payroll, Ceridian Europe Ltd

Jill Bonehill: Thank you all very much for joining this roundtable. I extend thanks to Abhishek and Access Group for the kind sponsorship.

In addition to my role with the CIPP, I’m non-executive director for a health and wellbeing company, and also a volunteer adviser for the Citizens’ Advice Bureau. During my 22 years with the Bureau I’ve specialised in debt advice, financial awareness and education – so pay on demand interests me.

This is a great opportunity to share views and experiences of pay on demand and the need for financial education as well.

Abhishek Agrawal: EarlyPay is an on-demand payment solution from the Access Group.

The Access Group is a mid-market enterprise software company offering products and services to more than 35,000 customers in the industrial, manufacturing, non-profit, financial services, transportation and haulage, distribution, construction, and health and social care sectors.

EarlyPay is Access Group’s on-demand salary payment offering. It comes integrated with Access Group’s HR, payroll and time and attendance products, and is available to more than 2,000,000 employees who use one of these products.

Anthony Cronin: Flexi Range is a financial wellness tool which helps people manage their income, moving them to a more manageable frequency of weekly or fortnightly without impacting the employer’s processing.

The product came about because during my twenty years in the payroll industry where my role was predominately to move employers from the weekly to monthly cycle I saw the impact on staff.

Jason Butler: Before joining Salary Finance I worked in the financial wellbeing sector, and had a financial services career for 25 years.

I have a monthly column in the Financial Times, where I write about my big interest: the emotional behavioural and psychological aspects of money. I’ve been involved in the emotional behavioural psychological aspects for over five years, and have written several books about this issue.

Salary Finance essentially started about four years ago to provide payroll linked loans, then expanded into savings accounts, and then advanced pay. We are also the government’s main partner on help to save paid deduction. We are rolling out life insurance income protection in conjunction with Legal and General which is a major shareholder.

Salary Finance bought its biggest competitor, Neyber in March, so we now have a reach of over 3,000,000 employees. We are global, and desire to expand to Asia where we have a footprint. So, we are thinking global, and believe that habit change is necessary, but this cannot happen without payroll focused employers, supported product suites and communication messaging.

Jaspal Randhawa-Wayte: Pay on demand is something we have been looking into, but I hear mixed views with some customers keen but some worrying it could be a bad idea.

We don’t want our employees drawing down on their pay, to the point that when they hit payday they’ve got very little left, because then it’s always harder to catch up. So, I think the concept of using it for those sudden last-minute bills is absolutely fine. But it’s just making sure it doesn’t become a bad habit.

I’m keen to draw on the experience of others.

Samantha Mann: Pay on demand is a subject of huge interest to the CIPP, in ensuring payroll professionals who need to be involved are fully aware of all of the implications if an employer chooses this route.

Abhishek Agrawal: One of the reccurring themes we hear from customers is the difficulty in recruiting and retaining staff in low wage sectors. Increasing pay can help but most companies cannot pay more. However, they can pay better by offering on-demand pay – this is why we created EarlyPay.

The ‘working poor’ is a big issue amongst UK workers. With practically no savings, these people are essentially one boiler breakdown away from having to visit a payday lender. I’ve seen situations where people don’t show up to work, because they can’t fill up their car. So, lack of savings and access to liquidity is a huge problem.

Whilst employees are struggling between paychecks, companies over the years have moved from weekly to monthly payroll for operational efficiency. This makes things more difficult for employees.

So, pay on demand is something we offer to help employees as well as employers. Using the EarlyPay app, employees can withdraw a part of their earned income whenever they wish. The money is funded by the Access Group so the service doesn’t affect companies’ cashflow. We collect the money from the employer at the end of the pay period. A small transaction fee is charged to the employee or employer depending on the contract. In some cases, the employee and employer share the fee.

The service was launched in October 2019 to our customers. The demand and the feedback has been phenomenal. Employees love it, as they feel in control over their pay and have a safety net. Employers love it because they have seen people working more shifts. Getting paid early makes staff want to work more. It’s a positive outcome for both.

Usage patterns show 20 to 30% of employees using EarlyPay in a given month, typically making one or two transactions. The average withdrawal amount is around £80. More than 80% of transactions are for essentials like food or utility bills, so the service is used responsibly. Which is why more than 90% of people using EarlyPay rate it as the most important employment benefit available to them.

EarlyPay is growing rapidly and we expect on-demand pay to become an industry standard within a few years.

Katie Duxbury: We had a general business demand to reinstate a weekly payroll, because the monthly cycle just felt too long for people to manage their finances. What we were also finding is that, as we are in the care sector, people were taking second jobs that paid weekly whether the NHS bank or elsewhere. They were using their monthly pay to cover their monthly rent via direct debit but then using their weekly pay for food, petrol etc.

So, what we wanted to do with pay on demand was to get into that ‘sweet spot’ to allow them that weekly cash flow as well as that monthly injection.

Safeguarding was a massive concern for us. We had quite polarised views from the steering group and the stakeholder group we surveyed before we went live, which was helpful because it really kind of ‘held our feet to the fire’ to ensure that we know the right care is in place for people. There were concerns about giving people money quickly and therefore that they would be broke a lot quicker, and about people gambling the money away or spending it frivolously.

We also kept down, quite low, the percentage that people can draw down; 45%. We estimate the money that’s available based on the lowest hourly rate the person would attract, knowing that they also do night shifts and weekend shifts, and generally are getting paid more than we’re telling the system they can draw. So, again, we are kind of capping the amount that people can draw, which felt like the right thing to do when we launched in November 2019.

After a couple months we found that those who had registered on the app but had never used it to gain any money just really liked having it so that they could see weekly how much was available. They’ve got a safety net there, providing a level of stress management, even though they weren’t doing anything different with that cash flow – so it was really helpful.

Our average drawdown is about £79, and we’re averaging around about 1.4 transactions a month per user, slightly more than the average according to our provider. Generally, others are using the application a little more than we are, but we take this as a positive.

We had two case studies we focused on. One was a young lad who was trying to buy his first house, and was using the app to see how much money he could spend at the weekend and so it was helping him to stop spending money that he didn’t have to. And the other was a mom of three who was using it for cash injection for her weekly school, food and whatnots. She knew she didn’t need to touch what she got at the end of the month, and so didn’t need to lean into high interest loan products again – which is part of what we wanted to achieve.

What we’re trying to do now is to encourage saving so that people are not even needing to use the application. This is our next philosophical journey with our employees.

Jaspal Randhawa-Wayte: Katie, you’ve rolled this out in a responsible way keeping in mind the financial wellbeing aspect. Have you found with your research unanswered questions? Maybe a small minority of the population perhaps didn’t really want to disclose for what they are using the funds? Was that a concern?

Katie Duxbury: We didn’t get 100% response to the survey. I suppose if there was any kind of nefarious spend going on, nobody is going to declare it in a survey to their employer.

What we’re also finding is that people don’t now have to go through the indignity of going to their manager and saying they need that extra hundred quid for a holiday as they can do that through the app which is completely anonymous. They don’t have to ask for permission or forgiveness or whatever. Anything we can put in place that avoids that conversation is a good thing.

Jill Bonehill: I think it’s reassuring to hear that the vast majority of people are asking for access to their pay for genuine emergencies or essential expenditure.

James Herbert: Obviously different providers of pay demand products will have slightly different flows and funds, but the mechanics basically mean workers get earnings in real time. So, it’s a hugely powerful financial product.

What we find is that the better the level of financial understanding and education the more effective is the use of our product. The better educated people are, the more effectively they are going to manage their financial lives. There’s a range of different products available to corporations and chief finance officers of large organisations, but the man in the street has been unable to access many.

Jill Bonehill: You mentioned ‘better educated’. Whose responsibility is it to ensure staff, colleagues, employers are better educated?

James Herbert: That’s quite a big topic, and I think financial education needs to actually start appearing in schools.

The Bank of England did a survey last year, and while 70% of millennials believe they have a good level of financial understanding, actually only 24% do.

I think long-term we need to look at how we can educate people from a younger age and put something into the curriculum. Let’s start teaching children so they can better manage their finances.

Short-term we’re in a really interesting position as the level of engagement in our app is phenomenal. We’re seeing an 80% registration rate, with active users accessing the app about 2.1 times a day and drawing funds about 4.1 times a month.

So, we have a really good opportunity to drip-feed financial education in small bite-sized pieces. And, therefore, employers have opportunity to drive that engagement, to help educate their workforce.

• Policy article
• Professional magazine