14 November 2024
Anna Buckle, director of operations and impact at PayCaptain, discusses the expanding role of payroll in supporting employees’ financial health
Payroll is no longer just a back-office function dealing with the mechanics of paying wages. In the modern workplace, payroll is expanding its remit and increasingly playing a vital role in fostering employee financial wellbeing beyond coordinating with internal departments like human resources (HR) and finance. Payroll teams are now working with external organisations, such as financial wellbeing specialists, government bodies and third-party financial services providers. This broader approach reflects the growing recognition of the critical importance of payroll and its high levels of engagement as an opportunity to support better
financial wellbeing.
The increased focus on financial health is a response to several trends, including the rising cost of living, increasing levels of personal debt and greater awareness of the impact that financial stress has on employee productivity and mental health.
Access to services
According to research by the UK-based Money and Pensions Service, nearly half of the working population regularly worries about money. This financial stress can manifest in a number of negative outcomes, including reduced workplace engagement, increased absenteeism and lower overall productivity. Recognising this, many organisations are turning to their payroll departments not only to facilitate regular payments but also to provide support, advice and access to tools that help employees manage their financial situation more effectively.
By working with financial wellbeing specialists, payroll departments can offer their employees access to a wide range of services that go beyond the traditional boundaries of payroll.
This broader involvement with external financial organisations enhances the value of payroll services by embedding financial wellbeing as part of the employee experience. Rather than individuals turning to high-interest loans or payday lenders during difficult times, they can access supportive, employer-endorsed financial services directly through payroll. This model is particularly important in mitigating the effects of financial stress and helping employees to build long-term financial resilience.
Selecting a partner
Features that payrollers could be looking out for when picking a partner that can provide a more holistic approach include the below.
On-demand pay: this is a critical innovation, as many employees face financial difficulties during the month due to unexpected expenses. By allowing employees to access their wages when they need them, employers can reduce reliance on high-cost credit or payday loans, which can quickly spiral into unmanageable debt. Look for suppliers that can offer access to this free of charge to employees, as nobody wants to be penalised with further charges in a
financial emergency.
Financial planning tools: there are features that can offer employees help to manage their income more effectively. These tools include budgeting aids, financial literacy resources and access to financial advice. By empowering employees with better information and tools, you can encourage employees to make more informed and responsible financial decisions.
Payroll automated savings: payroll solutions that have easy to set up savings schemes allow employees to automatically save a portion of their wages each payday. These schemes are an easy and effective way for employees to build up an emergency savings fund, which is essential for financial security. Take some time to research and get the configuration right for this to be impactful. Rates of savers can vary from 0% to more than 50% dependent on how you approach it, so it’s worth getting some specialist knowledge here. Organisations such as Nest Insight focus on understanding the impact of these types of initiatives. See https://ow.ly/mFOX50TUQgi.
Debt repayment tools: many employees struggle with managing their debts, whether they are credit card balances, personal loans or other forms of borrowing. Look for a provider that partners with reputable organisations that can help employees manage debt and provide support for more sustainable repayment plans.
The importance of collaboration
Collaborating with financial wellbeing organisations and external partners is crucial for payroll departments to achieve their goals of supporting employees.
These partnerships bring several key benefits.
Expertise and resources: payroll teams, while essential in processing wages, may not have the in-depth financial knowledge to support employees with their personal finances. In most busy payroll teams, bringing in the additional element could be too much of a stretch, so collaborating with expert organisations allows payroll departments to offer employees access to professional financial advice and support. This collaboration brings together the operational strengths of payroll and the specialised knowledge of financial wellbeing organisations.
Comprehensive employee support: financial wellbeing is about more than just payday; it includes savings, managing expenses, debt management and preparing for future financial challenges. Working with external partners enables payroll to support employees across all these areas, ensuring they have the tools and resources to manage their financial health comprehensively.
Improved employee retention and engagement: employees who feel financially secure are more likely to be engaged and satisfied with their jobs. In fact, employers that support their employees’ financial wellbeing often see improvements in retention, productivity and overall workplace satisfaction. Payroll departments that work with financial wellbeing organisations contribute directly to these outcomes, helping to create a more engaged and resilient workforce.
Tackling inequality: financial stress disproportionately affects lower-income employees. By collaborating with financial wellbeing organisations, payroll can provide targeted support to those who are most vulnerable. Services such as
payroll automated savings can be particularly impactful for employees who may have limited access to traditional financial services.
Payroll departments in the UK are evolving to take on a much broader role in supporting employee financial wellbeing. By collaborating with external financial wellbeing organisations, payroll teams can provide valuable support to employees that goes far beyond processing wages. This shift is driven by a growing recognition of the profound impact that financial stress has on employee wellbeing and productivity.
Innovative companies are leading the charge in integrating financial wellbeing into payroll services. Offering tools like on-demand pay, financial education, payroll automated savings and debt management support can help employees to build long-term financial resilience. This collaboration between payroll and external financial wellbeing organisations is essential for fostering a financially secure, engaged and productive workforce.
This article featured in the December 2024 - January 2024 issue of Professional.