A new technology-powered model of paying people for their work is signalling an end to the ‘absurd’ pay structures that cause unnecessary financial stress and anxiety
The majority of people in the UK get paid monthly, but the disconnect between their expenses and when they get paid forces millions to rely on expensive credit to get through the month. Life’s expenses, whether planned or otherwise, don’t wait for payday.
A monthly pay cycle also perpetuates a “payday millionaire” culture. Research by Portafina found 43 per cent of people’s monthly disposable income is spent within 24 hours of being paid, often irrationally, and 81 per cent within seven days. A small change in the way organisations pay their employees can have a big impact on how employees’ budget, their whole mindset towards money and their overall wellbeing.
“If you go back a few decades, it was normal for people to be paid daily and it’s really only in the last 70 years, because of the technology of the time, that pay cycles shifted to monthly,” says Josh Vernon, co-founder and managing director of Earnd, an app that allows people to choose when and how they get paid, in real-time and for free.
“It’s extremely rare for all of an individual’s expenses to fall on the exact same day, every single month. If we can give people more flexibility in terms of when they are paid, then they can budget more easily to reduce financial pressure and start working towards a positive financial future.”
Earnd (www.earnd.com) is a pioneer in the emerging field of on-demand pay and is unique in its commitment to remaining free for all employees and public sector employers, forever. Earnd’s mission is to help people take control of the money they’ve earned by allowing them to choose when and how they get paid.
This is especially important for shift workers who may not know how much they will get paid until the money hits their account. By being able to track and access pay on a daily basis with Earnd, they can ensure they have worked enough shifts to meet expenses.
Coupled with integrated financial education tools, Earnd also encourages positive financial behaviours such as growing savings and repaying debts.
Founded in Australia in 2018, Earnd is available to more than 130,000 employees across the globe. With tens of thousands of NHS employees already using Earnd in the UK, the fintech has plans to roll out to UK government, local authorities and the private sector next year. In Australia, the app is already in use by employers such as Hungry Jack’s, the local franchise for Burger King, and is launching with its first US employers in early-2021.
Companies that use Earnd’s platform can expect up to 50 per cent take-up among their employees and four in five Earnd users say it has had a positive impact on their finances. Earnd’s focus is financial wellbeing so they will never charge employees for access to their wages.
If somebody is charged £1.75 to drawdown £50 and asked to pay it back in five days, for example, that equates to an annualised interest rate of 255 per cent and is comparable to using high-interest credit or loans.
The value isn’t just on the employee side. By alleviating the number-one cause of stress and anxiety for employees – money worries – there are also very clear gains for employers from improved morale and productivity. A Kronos report found three in four people would prefer to work for a company that offers financial wellbeing support and one in two people would work harder if their employer offered on-demand pay.
Employers in Earnd’s portfolio have reduced their employee turnover rate by up to 16 per cent and many are incorporating on-demand pay into their mental health strategies to support staff wellbeing.
The Royal Free London was among the first NHS trusts to embrace Earnd and hasn’t looked back. Chief executive Caroline Clarke says: “When staff use Earnd, they realise it’s really going to help their lives and materially improve their financial wellbeing. That makes them come to work and feel happier as a result. So why wouldn’t you do it?”
Importantly, Earnd is easy to implement and doesn’t need employers to use their own cash flow or working capital to fulfil on-demand payment requests. Earnd is owned by Greensill, an alternative finance firm with international reach that last year provided $150 billion of finance to more than eight million customers and suppliers in more than 175 countries. It uses predictive artificial intelligence technologies to advance them cash based on the value of future payment receipts and invoices issued.
Using Greensill’s fintech infrastructure and access to capital markets, Earnd is able to access ultra-low-cost capital and provide on-demand pay at no cost to employees across the globe.
“We are a financial wellbeing product, so we don’t charge individuals for access to something that’s theirs; it’s counterintuitive,” says Vernon.
“On-demand pay isn’t just an emergency finance tool; it’s about genuinely shifting the way people get paid, to better suit their lives. We see some examples of it where our higher-paid users drawdown on a daily basis and put their income in a mortgage repayment account or a savings account, so it really does shift it from an emergency tool to one that gives people complete control and flexibility over their pay.
“People already access entertainment, food and transport on demand, so they should be able to access their pay on demand to match the pace of their expenses. That means the ability to choose when and how they will get paid, because you’ve earned that income and it can support you in such a significant and powerful way. It’s a no-brainer. Society will shift to an on-demand pay economy, for the good of everyone.”
For more information please visit www.earnd.com