01 April 2019
This article was featured in the April 2019 issue of the magazine.
Julie Lock, general manager (Flexipay) for Mitrefinch Ltd, explains why employers should care about the financial wellbeing of their employees
With 59% of UK workers relying on credit cards to survive and 63% of those using credit funds every month just to get by, financial stress has impacted 21% of the workforce which rises to 30% for people in higher level roles.
Financial stress isn’t just a debilitating problem for the workforce, it’s impacting employers too. The worries of financial problems never switch off; in fact, they follow people to work which impacts on their productivity in the workplace. It is also a contributing factor to absenteeism.
Financial stress has a negative impact on peoples’ mental health and employers need to address this head-on as part of their corporate social responsibility strategy. Financial stress impacts sleep, health and relationships, all of which impact workplace performance. One in four people in the UK struggle to concentrate at work when thinking about their finances. One in five have wasted working hours dealing with repayments.
This isn’t a new problem for employers – it’s an ongoing problem that’s not going to remedy itself. The Money Advice Service found nearly three-quarters of 18 to 34-year-olds have experienced mental health or wellbeing issues linked to money. Only 12% of employers offer workers face to face financial advice.
In today’s on-demand world it’s all too easy for workers to find themselves lured into living beyond their means and spending what they don’t have. In this consumerist world of one-click ordering and same day delivery, the growing need for instant gratification is all too easily satisfied before earners can begin to think about the financial consequences.
High cost on-demand credit is damaging the UK workforce. Workers are even struggling to cover the cost of traveling to work, threatening their right to earn their way out of debt. In 2017, The Economist reported that credit card borrowing had soared with a growing number of households struggling to keep up with repayments. The BBC has reported that an estimated 4.1 million are experiencing financial difficulty owing to missed domestic or credit bills.
...simply the money the employees have already earned being advanced...
The payroll profession can now help their employees with financial wellbeing. With 78% of your workforce using some form of credit each month, 43% of them stating that they wouldn’t feel comfortable asking their employer for an advance, and 45% saying they would prefer to be paid more frequently, the answer is to offer the workforce flexible paydays. This puts them in control of when they get paid, with rules in place to safeguard them from drawing out too much money too soon. Allowing them access to their earned pay when they need it, avoids the need to get into debt. This means that when the unexpected happens and their bank balance is low, your employees won’t need to resort to payday loans or overdrafts to cover surprise bills or expenses.
Latest payroll technology now enables employers to offer flexible pay to their staff. Instead of employees having to wait until payday to receive their earnings, they can now self-advance pay when they need it. Giving employees the power to manage their finances without the need for payday loans.
Employers set the rules and their employees reap the benefits. With growing financial pressures, the ability to withdraw the money employees have already earned when they need it is a powerful incentive.
It’s not a loan and it’s not credit; this is because it’s simply the money the employees have already earned being advanced at nett, into their bank accounts ahead of payday. Therefore, it is not subject to tax or National Insurance contributions deductions, as these are processed in the normal pay cycle.
The employer does not need to worry about funding the early payments, as this is all taken care of. When BACS files are processed, the advances are re-paid, and the rest of the earnings are paid as normal into the employees’ bank accounts.
This results in the removal of financial worry and stress, making employees more productive, motivated and loyal, and they stay longer and are less likely to leave. This benefit can increase retention rates and job applications. There are no loans, no credit and no interest changes, just a transaction fee. Funds are taken care of and repayments are made on normal payday, therefore removing the need for employers to fund early payments. This solution benefits all staff, is socially responsible and helps employees to budget and avoid debt.
The payroll profession can now enable their employers to help their workforce in reducing financial problems and prevent employees entering cycles of debt caused by overdraft fees, high-interest credit or pay day loans. Better financial wellness benefits everyone.