Seven UK providers of earned wage access, together with the Chartered Institute of Payroll Professionals (CIPP), have launched a new code of practice to help ensure their services deliver good outcomes for employees.
Earned wage access is a financial service that typically provides low-paid and hourly workers access to their accrued wages before the end of the payroll cycle.
More than 4 million workers are now being paid when they choose, according to the CIPP, with one in 10 companies now offering some form of earned wage access (EWA).
Since EWA schemes, also known as employer salary advance schemes or on-demand pay, can involve fees for employees to use them, bodies including the Financial Conduct Authority (FCA) and Nest Insight have called for greater oversight of how employers provide them for their staff.
Earned wage access
The founding members of the Earned Wage Access Group, which created the code of practice, are the Access Group, AnyDay, Ceridian, Hastee, Level Financial Technology, Salary Finance and Wagestream.
Speaking at the start of National Payroll Week, Jason Davenport, chief executive of the CIPP, said: “EWA is a very hot topic in the payroll industry at the moment, so the CIPP is delighted to join forces with these organisations to ensure the code of practice offers our industry best practice guidance.
“We would encourage organisations considering the introduction of an EWA system to visit our website to understand more about the code and how best to implement it within their payroll function.”
Research has shown that low and middle-income households benefit from a more frequent pay cycle for a broad number of reasons, and nine in 10 say their financial situation is stable or improved once they get paid when they choose.
Christopher Woolard, who chaired the Woolard Review into change and innovation in the unsecured credit market for the FCA, said: “The earned wage access market in the UK continues to grow, providing consumers with an additional platform to manage and improve their financial wellbeing. However, with rapid growth of consumer lending products comes risk, and it is crucial that customer outcomes are prioritised by providers.
“I am proud to have supported the development of the code of practice in response to the need for a commitment to common standards across wage access providers. However, the development of and commitment to the code is just one step. Success remains to be seen in the actions of providers to uphold these standards which will only emerge over time.”
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The nine commitments of the Earned Wage Access Code of Practice:
- Product design and value: Firms will design EWA products and services that meet the needs of employees and provide fair value to consumers.
- Communicating with consumers: Firms will communicate with consumers in a way that is clear, fair, and not misleading; allowing consumers to make informed decisions.
- Vulnerability: Firms will act to deliver good outcomes and consistently fair treatment to vulnerable consumers in relation to the EWA products
- Ongoing consumer support: Firms will support consumers to realise the benefits of EWA products and services in pursuit of their financial objectives.
- Product governance: Firms will continuously manage EWA products and identify where products no longer provide fair value or meet consumer needs.
- Oversight and measuring outcomes: Firms will monitor the outcomes that they are delivering to consumers through appropriate management information.
- Appropriate consumer relationships and conflicts of interest: Firms will maintain appropriate consumer relationships and avoid conflicts of interest that lead to consumer harm.
- Training and competency: Firms will train staff to provide suitable service and support to consumers. Staff will feel comfortable in the roles they take on.
- Assurance: Firms will commit to annually assuring that they meet the measures outlined within the code and deliver good outcomes for consumers.
