What if every day was payday?

The rise of instant wage access is a gamechanger for employee wellbeing and engagement, and could also signal a pivotal change in the global financial landscape

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Instant access is something that many people have become accustomed to in everyday life, whether that’s managing personal finances, streaming entertainment or selecting same-day delivery on goods. It’s little wonder that attention is now starting to turn to the traditional monthly pay cycle. According to WTW’s 2022 financial wellbeing study, a third of UK workers live paycheck to paycheck without any spare savings for emergencies – but this doesn’t have to be the future. 

The evolution of the global financial system has made it increasingly possible for organisations to offer employees faster access to wages. “The traditional monthly pay cycle is changing to meet current financial trends and employee expectations,” says Ben Thompson, CEO and co-founder of Employment Hero, an end-to-end employment management platform. 

“With real-time payment networks becoming more common, the need for immediate transactions is affecting how payroll is handled. The old model of waiting for pay, a result of past complexities in processing payroll, is becoming outdated. People now expect faster access to their earnings.”

Strengthening relationships with employees 

Enabling easier access to wages can provide mutual benefits for employees and employers. “Instant wage access is changing how companies manage their workforce, bringing clear advantages to HR and talent management,” says Thompson. “Offering instant access to earned salary, known as wage streaming, lets employees access their pay immediately, increasing their engagement and feeling of value.” 

This has already taken off in the US, with many large organisations such as PayPal, McDonald’s and Uber using instant wage access, also known as earned wage access, to support existing employees and attract new staff. Indeed, a 2022 study from ADP on earned wage access found that 96% of employers who offer on-demand pay say it helps them attract talent. 

Offering instant access to earned salary, known as wage streaming, lets employees access their pay immediately, increasing their engagement and feeling of value

“Daily pay helps with financial stability and managing unexpected costs, while also improving the relationship between employees and employers. It boosts motivation, cuts down reliance on credit, and gives a sense of immediate reward for work. This aligns the financial wellbeing of employees with the goals of the organisation,” says Thompson. 

The ability to access wages on demand, through services such as Employment Hero’s InstaPay Daily, can lead to lower financial stress and overall better engagement at work. Employment Hero’s solution doesn’t create any form of credit for the employee. Workers can simply gain access to their money when they’ve earned it, rather than as a lump sum at the end of the month. 

Instant access to wages also has the potential to improve employees’ motivation when it comes to being flexible with their time. For example, an employer asking someone to cover a last-minute shift is more likely to get a positive response if the employee jumping in can be compensated as soon as they clock off. 

A survey of Employment Hero’s InstaPay users found that 98% of employees would use the service again. The same survey found that 57% of employees used InstaPay for emergencies, 36% used it to manage bills and only 14% used it for leisure, suggesting that early access to wages is particularly helping people cover essential and unexpected expenses.

Elevating SMEs

Besides improving employee experience, offering instant wage access via an outsourced provider can also help simplify the overall payroll process. While employees can choose to be paid outside of their usual cycle, this doesn’t change the payroll timings and cash flow for their employer. 

“A lot of HR and talent leaders are being asked to provide advanced salaries to employees. More established businesses might facilitate access to a percentage of an employee’s earned wage, others on a case-by-case basis, but smaller businesses don’t have the flexibility because of the impact on cash flow,” says Damon Anderson, managing director of Employment Hero UK.

“One major advantage of an integrated auto-pay software system is that it allows employers to provide a powerful incentive to their staff. Employees can instantly access their earned wages using this tool, which scales effectively without negatively impacting the business. Moreover, employers can manage payroll as usual since the payroll provider handles any upfront costs.”

SMEs can tap into the skills and resources of a large provider, making the payroll process easier, more efficient and compliant. Doing so can free up valuable time for decision-makers to focus on core business activities rather than administrative tasks. 

Thompson explains: “As SMEs grow, our platform scales with them, accommodating increasing payroll needs without the need for additional resources. As financial trends evolve, particularly towards immediate transactions, using Employment Hero’s software keeps SMEs at the forefront of these changes, making them more attractive to current and prospective employees.”

Anderson adds that SMEs, in particular, are always looking for better benefits to offer employees but that often significant benefits are the reserve of large businesses. “Health insurance is a classic one, or pension contributions,” he says. “And what we can do at Employment Hero is leverage our size. As more businesses join the platform, we can use that to negotiate better benefits on behalf of all of our customers.”

A shift in the system 

Thompson believes that the widespread adoption of daily pay will greatly affect the global financial system. “In Australia, our home market, there’s around £16bn in wages that employees have earned but not yet received. If this money was paid out daily, it could reduce employees’ reliance on credit cards or payday loans,” he explains.

“This change would help with financial stability and give people more chances to save and invest their money on a daily basis. An average person earning £42,000 a year could earn an extra £175 annually just from the interest of daily savings.” This immediate payment model also enables consumers to establish themselves as lower credit risks. This means that they are more likely to get better rates from providers, potentially saving workers thousands annually. 

Having a platform such as Employment Hero processing billions of pounds of wages also unlocks opportunities to harness combined spending power and negotiate deals for users whether that’s discounts on their utility bills or offers that help support local businesses. 

The transition to instant wage access could revolutionise the traditional pay cycle, enhancing financial wellbeing for employees, creating a more engaged and motivated workforce and streamlining HR processes. Leaders who want to stay ahead of the curve and offer their employees something that their competitors might not yet be thinking about should sit up and take note.

For more information please visit employmenthero.com/uk