Flexible Pay: What is it and why should you care about it?
You are likely to have come across the phrase ‘flexible pay’ recently, but what exactly does it mean, and why are so many businesses now offering it to their employees?
As the team behind the world’s most widely-used financial wellbeing app, which is built around flexible pay, we think we’re probably in the perfect position to explain what ‘flexible pay’ is, and the reasons why businesses are increasingly starting to offer it.
As the team behind the world’s most widely-used financial wellbeing app, which is built around flexible pay, we think we’re probably in the perfect position to explain what ‘flexible pay’ is, and the reasons why businesses are increasingly starting to offer it.
What is flexible pay?
Flexible pay gives your employees the flexibility to access the money they have earned at any time, meaning they no longer have to wait until payday to access money that is rightfully theirs.The fact that the money they are accessing is theirs is an important one, as this means there are no borrowing or interest charges, which subsequently prevents your employees from getting into a cycle of debt which can have huge ramifications on their life.
We understand that as a business it simply isn’t cost-effective or sensible to be running payroll on a frequent basis, or managing complex salary advance/employee loan schemes, which is why offering your employees flexible pay is a smart way to help them benefit from increased liquidity.
What does flexible pay mean for my employees?
Throughout most of the world employees are paid monthly, and despite the fact we just accept this to be normal, when you actually think about it, there are countless reasons why this just doesn’t work.To begin with, there is the simple issue around your employees not being able to access the money they have rightfully earned. Giving your employees the option to take their money when they want gives them the flexibility to do the things they need to do, without having to worry about it.
Nearly all of us have been in the position where we have been confronted with an unexpected expense, but you still have one or two weeks until payday. This situation has typically left room for payday loan providers with sky-high interest rates to exploit those in need, and subsequently trap the most vulnerable within society into a cycle of debt, simply because they didn’t have access to their money to cover an unexpected expense.
The stats are damning on this, with 3.1 million people in the UK exposed to payday lenders every year (FCA, 2022). But there is a solution, and that solution is flexible pay, as the stats below illustrate
Wagestream impact on users
covered an unexpected bill
78%
avoided using their overdraft
48%
avoided a payday loan
42%
What does it mean for my business?
As illustrated above, flexible pay has a huge impact on the life of your employees, but it’s also true that it makes significant financial sense to your business.By giving employees access to flexible pay, and actively helping to improve their financial health, businesses have seen huge growth in terms of their relationship with their employees, so much so that 82% of Wagestream users say they feel more positive about their employer as a result of being offered flexible pay.
Crucially, in this current labour market, this positive feeling towards employers is also translating into increased employee retention.
52% of Wagestream users say they are more likely to stay at their employer longer as a result of being offered flexible pay.
Equally interesting is that offering flexible pay is also having a profound impact on how quickly businesses are able to recruit. A recent study found that businesses with job adverts mentioning flexible pay through Wagestream as a benefit were actually filling their vacancies 27% faster than those with no mention of Wagestream.Recruitment and retention aside, removing financial stress from the life of your employees should also be a key priority for performance reasons, especially when you consider the stats below.
Impact of financial stress on population
The cost to UK businesses each year from absences and a lack of productivity related to poor employee financial wellbeing
£1.56 billion
of millennials are distracted by money worries at work
87%
of people aged between 35 - 54 are distracted by money worries at work
72%
of Wagestream users now feel more in control of their finances
73%
The future of flexible pay
Flexible pay is growing and here to stay. We already provide employees at hundreds of UK businesses with access to flexible pay through our leading financial wellbeing app, including at the NHS, Halfords and Greene King.A recent report by The Resolution Foundation outlined that ‘workers should have the right to choose how regularly they get paid’, and with Chancellor Rishi Sunak also set to look over a plan put forward that would let employees access their pay as soon as they have earned it, there is every chance that one day flexible pay may become a requirement for businesses moving forward.
