Financial wellbeing: the role payroll can play

25 June 2018

This article was featured in the July - August 2018 issue of the magazine.

17 million working-age people in the UK have less than £100 in savings. But thanks to salary-linked saving and lending, payroll can help improve employee financial and mental wellbeing in a whole new way. Asesh Sarkar, CEO of Salary Finance, explains how – and why it makes financial sense

Money problems cause mental problems

Day-to-day finances are the main cause of stress for some 18.5m people in the UK. And at least 25% of those admit that living in such a precarious financial position affects their ability to do their job [1]. Mental health is a hugely complex issue, but one thing is clear: money so often plays a part.


Let’s not talk about it, ok?

Of course, for companies looking to support employees with money worries, one of the biggest issues is that people in the UK really don’t like to talk about money.

A recent survey by University College London even found people are seven times more likely to tell a stranger how many sexual partners they’ve had than talk about their income [2].

So, short of forcing a game of financial truth or dare on the office, what can payroll do?


Salary-linked loans

Since 2013, debt has risen 26% per UK adult to £3,900 [3]. At Salary Finance, bad debt caused by the cycle of short-term, high-interest credit is the most common source of financial stress that we see.

But for the first time, employers have a practical option that can help stop their employees getting caught in this cycle, even if they do need to borrow. That solution is to offer employers access to a responsible lender through a salary-linked loan.


11.8% versus 200%

The key to the success of these loans is the salary link, meaning the money lent to employees is repaid through salary deduction. This means interest rates can be lower than most people will typically be able to access.

A typical interest rate for a Salary Finance loan to a person with a poor credit rating is around 11.8% compared to 200% with high cost lenders or equivalent, saving employees an average of 66% on their interest payments.


What’s in it for employees?

Salary-linked loans have minimal set-up costs. In the case of Salary Finance, for example, there are no implementation fees. However, the financial benefits to employers are far broader than that.

One of the biggest wins is money saved through lower staff turnover. A recent report by Harvard Kennedy School found employers have seen an average 28% increase in employee retention for employees that use Salary Finance. Given the cost of replacing and training staff, this can save thousands – if not more. The report goes on to calculate that even just a 5% increase in retention for US retail giant Target, would save $28 million [4].


Increased productivity

The other benefit for business is that employees under less stress are free to perform better. In a recent survey, 34% of employees in both the public and private sector say they accomplish less than they would like to due to poor mental health [5].

Providing access to salary-linked loans can help reduce this level of mental stress, and improve people’s ability to focus on their jobs.


Part of a financial wellbeing programme

Of course, many people struggle with finances without getting to the stage where they need a loan. It might just be they haven’t started saving for a rainy day.

So salary-linked loans are just one part of the wider financial wellbeing piece – combined with helping people save and yes, helping people talk about money. But it is an effective solution for those most in need so it’s an important start. And one where payroll professionals like yourselves hold the keys. n


Salary Finance

Salary Finance is an award-winning, fast-growing company underpinned by a social purpose. Its mission is to change the lives of working people – by helping them become debt-free and save towards their financial goals. Find out more at



[1] Source: CIPD

[2] Johnson A. London School of Hygiene and Tropical Medicine. Centre for Sexual and Reproductive Health Research, NatCen Social Research, Mercer, C. 2017. National Survey of Sexual Attitudes and Lifestyles, 2010-2012. [data collection]. 2nd Edition. UK Data Service. SN: 7799,

[3] Source: Bank of England, ONS

[4] Todd Baker and Snigdha Kumar, 

The Power of the Salary Link, Mossavar-Rahmani Center for Business and Government, Harvard Kennedy School, 2018

[5] Source: Katie Evans, Merlyn Holkar & Nic Murray, Overstretched, Overdrawn, Underserved: Financial Difficulty and Mental Health at Work, Money and Mental Health Policy Institute, 2017