New data from EY shows that almost three-quarters (73%) of people surveyed in the UK find it challenging to meet everyday expenses or worry about not being able to meet them, and half of these have faced a financial shortfall between pay periods.
The research, which was carried out at the start of lockdown in the UK, shows that 58% of people surveyed who have experienced financial difficulties have also reported a material deterioration in their health and wellbeing.
Although this issue has become more prominent in the current economic climate, it is not a new phenomenon.
According to the Money Advice Service, in the UK there are a reported 8.3 million adults who find meeting monthly bills a “heavy burden” and miss more than two bill payments within a six month period.
This will have had profound implications for some employers. According to EY’s research, financial stress suffered by employees can translate into diminished productivity, high turnover rates and absenteeism, costing UK employers an estimated £30bn annually.
EY’s research looks at FinTech innovation into salary flexibility, and found that for some employers, flexible pay could offer a way of adapting to the evolving world of work and earning patterns, while alleviating financial stress for some around monthly shortfalls.
Solutions like On-Demand Pay work by allowing employees to access a portion of their accrued wages in advance of pay day, with the remaining amount paid at the end of the pay period.
It works by integrating with employer payroll systems to advance funds to employees directly as requested, which can be a cashflow-neutral option for employers. Unlike salary-based lending it doesn’t involve borrowing or accumulated interest costs.
Even though On-Demand Pay is a relatively recent innovation, EY’s research found that a sizeable proportion of respondents (27%) considered themselves likely, or very likely, to use such a flexible salary product if it were offered by their employer.
The research also points to it being seen as a potential differentiator for employers, with 60% of respondents stating they would view a prospective employer more favourably were they to offer some such product as part of their benefits package.
As employers continue to implement longer-term remote or hybrid working models, many will also be considering the wellbeing of their people, and how they successfully emerge from the current crisis with a robust workforce. In addition to mental and physical health support, the financial burdens potentially facing employees should not be forgotten.
For some employers, offering more flexible ways of being paid could be one avenue to consider. This salary benefit could also provide a competitive advantage in talent attraction by making their employee benefit package stand out in the market.
As more research is conducted to better understand the connections between financial stress and how people access their salary, firms can become increasingly informed about how their pay and benefits packages can best be tailored.
The link between wellbeing and productivity is significant, with the research findings showing that 16% of those experiencing financial stress in the UK have had to take time off work or permanently leave their job. Any move to improving financial related ill health and workplace productivity would be positive for both employers and employees.
COVID-19 has accelerated the demand for greater flexibility in all walks of life, and progress to more flexible ways of office working, including pay and benefits should be expected.
Alongside various other measures, flexibility in how people can access their salaries could become part of new hybrid working models that reflect the increasingly fluid ways people are engaging with work.
Matthew Tucker is financial services partner at EY UK.