By Steve Tonks, Senior Vice President EMEA at WorkForce Software
48% of the UK population frequently feel monetary stress, with financial anxiety being a leading cause of poor mental health for three fifths (60%) of employees. It is clear that financial wellbeing has a domino effect on mental wellbeing. Combine this with rising living costs, that show no signs of slowing down, it is no surprise that a third of low-income households are struggling to pay bills every month, up threefold compared to pre-pandemic.
If we were to put this into perspective, that’s a third of 11.6 million working-age households in the UK, earning £25,000 or less, struggling to pay their rent or mortgage, utility bills, council tax bills or personal debt repayments. The Joseph Rowntree Foundation (JRF) rightly highlights that “behind these figures are parents gripped by anxiety, wondering how they will put food on their children’s plates and pay the gas bill,” and “young people forced to rely on friends to help cover their rent and avoid eviction.”
Now imagine this struggle on top of the growing fears of food poverty, with grocery price inflation reaching 5.9 per cent, the highest level since December 2011, it is inevitable that the most affected by these hikes will be low-wage, hourly workers – many of whom are frontline.
For low-income and hourly workers, lunar pay cycles can be particularly stressful, as there can be up to eight weeks of elapsed time between when hours were worked and when payment is received. As a result, many workers are forced into high-interest payday loans to make it through the month. Although the UK’s Financial Conduct Authority has stamped down on the most onerous payday loan terms, young people and women, in particular, are still turning to these lenders to manage their living expenses.
In an uncertain economic environment, where corporate energy bills continue to rise and inflation is at its highest in thirty years, many business leaders will struggle to align employees’ financial wellbeing with genuine fiscal concerns of the business. Yet, that doesn’t mean organisations are powerless to respond. Earned Wage Access (EWA) provides a simple yet highly effective way to improve the employee experience, while helping workers to better manage their finances both in the short and long term. But what does this look like in practice?
Breaking cycles to initiate the change
An EWA payroll scheme enables employees to access their wages before payday, empowering them to better manage their cash flow and avoid the high-interest payday loans that act as a contributing factor to financial anxiety.
Fortunately, for employers, the technology behind EWA is quite simple – and it involves capturing an employee’s daily worked hours and processing payments based on the rules that apply to that day. This is best achieved through a workforce management (WFM) solution, specifically one that can seamlessly integrate with existing payroll systems or third-party payroll providers.
By leveraging modern, cloud-based WFM technologies, employers can combine timesheet data with automated pay rules to ensure accurate and timely payment. Most importantly, automating the payment approvals process will ensure that the cut off for hours, especially overtime hours, can be paid during the period in which they were incurred. This will not only shorten the time gap between when hours are worked and when employees are paid, but also streamline and simplify payroll operations. This should be a welcome change for employers, who waste over 100 hours manually managing their payroll each year.
At a time when low-income, deskless workforces – including healthcare workers, retail staff and delivery drivers – are facing living costs hit a 30-year high, employers have a responsibility to help break outdated pay cycles.
With many UK companies currently facing an employee retention crisis, the ability to foster loyalty through EWA should not be disregarded. Encouragingly, research suggests that a thoughtfully implemented EWA programme can lead to a measurable improvement in employee satisfaction. Meanwhile, more than a third (38%) of employees would consider moving to a company that makes financial wellbeing a priority.
As we dive headfirst into the challenges 2022 has to offer, it has become clear that for businesses to remain successful in their recruitment and retention abilities, organisations must invest in WFM technologies, offering EWA capabilities to struggling staff during these times of financial uncertainty.
However, EWA shouldn’t be a ‘nice-to-have’ during times of economic upheaval. Instead, it should be viewed as a long-term CSR goal for organisations, supported by ongoing employee education and advice on money management. In a nutshell, companies that promote and adopt a culture of financial wellbeing and support will, in the end, gain a competitive advantage and long-term employee loyalty.