However, the study by the Chartered Institute for Payroll Professionals (CIPP) also found that more payroll departments are making payments between paydays: the proportion has more than doubled from 3% in 2023 to nearly 8% this year.
When asked if they provide interim or ad-hoc payments to employees between paydays, only one in three (33%) didn’t.
As more employers seem to offer a degree of flexible pay, we asked payroll experts why 89% of UK employers are not using or considering using EWA schemes.
Read more: Asda introduces salary flexibility policy to help cost of living concerns
Samantha O'Sullivan, policy and advisory lead at CIPP, said that the uptick in payments between payday could be due to relaxed rules from HMRC.
She told HR magazine: “Recently, HMRC relaxed the rules around the reporting of advanced payments. This has made it easier to administer some flexible payments outside of the usual payment schedule. If companies can keep track of advances themselves, they may not see the need for a more structured, and possibly restrictive, EWA system.”
However, if EWA is implemented responsibly it can improve employees’ financial wellbeing, according to Simon Puryer, executive practice lead for payroll consultancy LACE Partners.
Speaking to HR magazine, he said: “There are several benefits to EWA. These include improved financial flexibility, as it can be seen as a real benefit to employees differentiating them from their competitors.
“It provides reduced financial stress, alleviating some of the issues for those who live pay check to pay check. It also means that employees don't need to rely on high-interest loans, saving them from loan sharks and falling into financial hardship.
“As an aside, there is no impact on their credit score as it is an advance rather than a loan.”
Of the survey respondents whose organisations did offer EWA, nearly a quarter (23%) of staff took up the option.
Where EWA is offered, some of the benefits listed by respondents to the CIPP’s survey included improved financial flexibility and reduced financial stress by allowing early access to pay if needed.
For employers though, the EWA can raise concerns about misuse, workload for payroll teams and provider costs, Puryer said.
“Employers have concerns about EWA, not least that there is a potential for misuse. Frequent use of EWA could lead to employees not being able to pay for their basics come payday. Earned wage access is also deemed to encourage pay check to pay check living, not supporting people to budget properly.
“EWA could significantly increase not only the admin workload of the payroll team but also their ability to control it, especially if putting parameters in place around how much people can draw down on their salary and how often.
“For smaller organisations, EWA could have a significant impact on cash flow, making budgeting difficult because the employer won’t know who is asking for what, when.”
Read more: Earned Wage Access could calm money worries, CIPP says
In order to ease these concerns, the CIPP has created a voluntary EWA Code of Conduct, which encourages EWA providers to deliver fair treatment to vulnerable customers and provide ongoing consumer support.
Employers should also ensure that other financial wellbeing tools are provided to staff, O’Sullivan said: “The CIPP strongly believes that EWA should be paired with financial wellbeing tools for employees, to allow them to make the best decisions around their finances.
“It is also essential that companies are aware of some fee structures for accessing earned wage access scheme. They may need to bear the cost, and therefore be aware of the potential for National Minimum Wage issues.”
The CIPP's survey of 468 payroll professionals was conducted between May and 10th June 2024.