Flexible pay has been a hot topic for the payroll and HR professions a number of years now.

It can be understood in two main ways. On one hand, it could mean giving employees the option to be paid more frequently at an interval of their choice, while on the other hand it could mean giving an employee a one-off advance on their salary when they need it.

It’s easy to see the potential benefits of this – if employees can access their salaries earlier or more frequently, it could help in part to alleviate the financial stress which is commonplace in our society, especially during the current pandemic crisis.

However, as is often the case when discussing payroll matters, it’s not quite as simple as that. We have to consider a number of important factors when determining whether flexible pay is really a suitable system for a company to use.

Here are the top three areas to keep in mind.

Financial wellbeing

First of all, flexible pay could have the opposite of the intended effect on financial wellbeing. People who suffer from low levels of financial literacy, and have difficulties with budgeting and saving, may find early access to money actually contributes to their problems in the long term.

Companies therefore need to work on a more holistic approach to financial wellbeing, rather than just relying on the flexible pay option.

Read more about ways to support financial literacy in the workplace.

Employment models

In addition, the potential business practicalities and benefits of flexible pay will depend heavily on the nature of the company and its workforce. It’s likely to be a more attractive proposition to employees in industries like retail, where jobs are typically lower pay and working schedules can be irregular, than to industries which work to the traditional 9-5 model and where monthly salary payments are the status quo.

The fact that the benefits of flexible pay aren’t universally recognised is reflected in research from Zellis, which found that just over half (52%) of UK employees wouldn’t take up flexible pay if it was offered to them.

Payroll complexity

Finally, flexible pay would require most organisations to rethink its finances and its payroll operations. Suddenly allowing employees to have an advance on their salary whenever they want could cause major cashflow problems.

The company would also have to consider how the government would legislate around such arrangements – something which would add further compliance complexity to an already highly complex area.

What does the future hold?

It’s clear that there remains strong demand for flexible pay and that it will feature heavily in the future of payroll technology.

But companies must carefully evaluate whether it marries up with the needs of their employees and the business at large. In other words, while it’s possible to see the benefits for the right type of organisation, it won’t be for everyone.