Earned wage access, also known as on-demand pay, is now offered as an employee benefit by 15% of UK employers. In industries that rely on shift workers – like care, retail and hospitality – it is estimated that almost a third of employees have access to the service. This includes those working at many of the country’s biggest employers: including Capita, Tesco, ASDA, Carpetright and a majority of NHS staff.
Despite lots of media attention, there is one aspect of this benefit that doesn’t get discussed enough: financial inclusion. Putting aside the employer benefits, like filling shifts and reducing staff turnover, let’s focus on how this technology breaks down barriers for staff. Especially those who need it most.
Financial flexibility
Historically, salaried jobs in the UK were paid monthly, and shift workers were paid weekly. That has changed. The share of workers paid weekly has halved since the early 2000s, primarily driven by the mass migration of shift workers from weekly to monthly pay.
While this move has been incredibly efficient for employers, cutting administrative costs and simplifying payroll, it has not been as beneficial for workers, especially those on the lowest incomes.
In 2000, half of the lowest-paid workers in the UK were still paid weekly. Today, that figure is below 20% and still falling sharply.
This matters because when unexpected expenses arise, those with the smallest savings are now waiting up to four times longer for their next paycheck. It also means that, while the growing list of direct debits can come out any day of the month, people only receive a single cash injection once a month. This makes budgeting harder and debt more attractive.
Pay has become less flexible for the most financially insecure cohort in the UK
A widening gap between work and pay
In short, the gap between work and pay for these workers has never been wider, and some are falling through it.
The market has taken note of this growing gap and created a range of expensive, risky and debt-driven solutions. These include buy-now-pay-later services, an increase in the use of overdrafts, a resurgence of payday loans and a plethora of rebranded credit cards.
In summary, pay has become less flexible for the most financially insecure cohort in the UK, leading to a range of new services that provide flexibility…but at a cost. This cost is high-interest debt which, in turn, makes these workers less financially stable, creating a ‘doom loop’ that increases the demand for these services.
Earned wage access offers flat-rate ATM-style fees
Earned wage access allows staff to access their earned income before payday, debt-free, without impacting their employer’s cashflow. To do so, they simply log into an app and withdraw a portion of their wages straight after a shift or a day at work. Payroll continues to operate as normal, but the financial wellbeing of staff can be transformed.
Earned wage access gives staff quick access to cash when needed; however, unlike debt, it meets this need without charging interest. Instead, on-demand pay providers typically offer a simple and transparent fee structure. Most charge a flat, ATM-style fee per withdrawal of less than a few pounds, meaning employees know exactly what they’re paying for the service.
Every employee is charged the same amount no matter their personal credit history, reason for withdrawing their wages, or amount being withdrawn. How? Because staff can only access money they have already worked hard to earn, not money that isn’t theirs. This makes it a much more cost-effective solution for accessing money in unexpected situations, especially when compared to debt alternatives.
By providing a high-quality, debt-free alternative to credit, employers can dramatically reduce the risk of their staff falling into cycles of debt.
Earned wage access is NOT debt
The fact that this flat fee usually works out cheaper isn’t the only benefit – it is better just because it is not debt! Unlike interest, workers know exactly what they’ll be paying. This figure can never grow, it doesn’t change based on circumstances, there can be no debt spiral and there is no delay for credit checks.
Any staff member can use it on the exact same terms – from the CEO down to the lowest-paid employee. It’s hard to overstate how unique this is, with most financial products perversely costing the lowest paid more and the highest paid less.
By providing a high-quality, debt-free alternative to credit, employers can dramatically reduce the risk of their staff falling into cycles of debt. In fact, a staggering 88% of earned wage access users eliminate their use of short-term high-interest debt after gaining access to this employee benefit.
The role of employers
Earned wage access must be offered as an employee benefit by your employer. You cannot access it if the company that payrolls you doesn’t have it. No exceptions.
For many workers – especially in sectors where most employers now offer this service, such as within the NHS and care – the choice is to work for an employer who offers on-demand pay, or take on costly debt.
Payroll and HR teams have both a moral obligation and a commercial incentive to offer this service as it increasingly becomes the norm in the UK. Not doing so will soon impact your firm’s ability to hire, retain and motivate staff. What you pay has always been important; now how you pay is as well.
Offering a lifeline
Earned wage access is a powerful tool for promoting financial inclusion and breaking down the barriers that prevent employees from achieving financial stability.
By offering immediate access to earned wages, you are offering a lifeline. You provide financial flexibility and eliminate the risks associated with debt. That’s why more and more of the leading employers in the UK, from the NHS to Capita plc, are adopting on-demand pay as part of their employee benefits strategies.
