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The pandemic has put pressure on wages and making finances stretch for the full month has become a challenge for many employees. Could enabling workers to access wages early support their financial wellbeing and reduce the risk of debt? Jonathan David considers the growth in the market for earned wage access.
There have been massive advances in the wage advance industry recently, with new entrants coming to the market and wide-spread adoption by organisations across the UK.
Even major payroll providers such as Sage - which has just announced a partnership with earned wage access company FlexEarn - are opening up early access to salary for employees who need to do so before their usual pay day.
There are many drivers behind the growth. The first is that advances in HR tech mean these schemes are feasible in a way they weren't 50 years ago.
Back in the 1960s, when the country shifted from being paid a weekly wage to a monthly salary, employers’ finance teams were more concerned with stripping out admin from the payroll function than improving employee wellbeing.
Employers didn’t care that weekly pay helped employees smooth their spending to match cash flows - they were too busy trying to shave down costs.
Now, with the advances in fintech, the idea of giving people the option to be paid on demand - but, this time, at no cost to employers - is back on the cards.
It’s not all on the supply side. There have also been changes to demand. During the pandemic, many employees have been earning less or furlough means that they have earned 80% of their usual salary.
It’s become harder to make ends meet, so when something goes wrong and an unforeseen expense raises its head, this c