Employees want payroll savings and flexible pay

Payroll savings schemes and flexible pay are two of the most important ways for employers to help their people build financial resilience, improving engagement, productivity, and retention.

In this blog

How best to raise employee financial wellbeing?

Payroll savings

Flexible pay (earned wage access)

Conclusion and key takeaways

How best to raise employee financial wellbeing?

Given that 94% of employees believe employers should provide financial wellbeing support, it’s worth considering which forms of help are most valued and effective.

Practical measures employers can provide include discount schemes, signposting help to find benefits, and prompt payment of expenses.

However, according to employees — as well as wider industry research — payroll deduction savings plans and flexible pay (earned wage access) are key measures to take.

“In many ways, financial wellbeing provision is at the same stage that mental health and wellbeing was at ten years ago when very few organisations talked about mental health – all the focus for wellbeing was around physical wellbeing. That’s completely transformed now and mental health is a huge focus for organisations. We need to achieve the same level of progress within financial wellbeing.”

Charles Cotton, Senior Performance and Reward Adviser, CIPD

Payroll savings

Instead of one-off payments or pay rises, many are seeking smarter solutions. 41% of employees want to be able to build savings directly from the point of payroll — the most asked-for feature in our research survey.

How do payroll savings schemes work?

A payroll deduction savings plan involves regular amounts being set aside directly from an employee’s earnings. It goes into a separate pot, where it builds up over time into a buffer or emergency fund. The ‘set and forget’ approach makes saving automatic and effortless.

“Progressive organisations are looking at how they can build greater financial resilience among their workforce, with a major focus on savings. Even if it’s only small amounts each month, employers can help employees to build up their savings and this will have a hugely positive effect on their financial wellness.”

Heidi Allan, Principal, Head of Financial Wellbeing, LCP

Benefits of a payroll deduction savings plan

There’s widespread evidence that employees want and value the ability to save directly via payroll. Other surveys have found that between 55% and 72% would like access to a payroll savings scheme.

Providing one creates a point of differentiation to help organisations attract and retain the best talent, as well as engaging and motivating existing employees.

Productivity and performance are also clearly linked to financial stress — or the lack of it. That’s why offering an easy solution to help employees build their financial safety net and reduce money worries is a win-win.

“People need to build savings to create greater financial resilience for unexpected events and expenses. Research has revealed that employees are much more likely to save some of their income if it’s put aside into a savings pot from their pay.

David Roberts, Principal Product Manager — Fintech, Zellis

Flexible pay (earned wage access)

Flexible pay, or earned wage access, allows employees to draw part of their earnings throughout the month, without having to wait until payday.

How does flexible pay work?

Employees can access a proportion of the money they have earned so far in a pay period. This might be capped at 50%, for example.

The money they draw down is theirs; they’ve earned it, and so there’s no interest to pay. It’s transferred instantly.

The only cost (which the employer can choose to cover) is a small transaction fee of around £1.95.

When the traditional payday comes round, the employee receives their usual pay, minus any drawdown they’ve made during that period.

Benefits of flexible pay

Empowering employees to set their own payday has a major positive impact on their financial habits and reduces reliance on expensive borrowing.

One study found that:

• 85% borrow less from friends and family
• 73% resort to payday loans less often
• 72% cut their credit card use
• 68% use bank loans and debt consolidation less
• 52% are less often in overdraft
• 72% say they now feel more in control of their finances

The report by Wagestream noted that:

“One of the concerns we sometimes hear about the flexible pay feature is that it will somehow cause individuals to get into debt. Our research consistently presents the opposite findings. Individuals report they use the flexible pay feature to pay bills on time, manage their spending, and reduce reliance on credit and debt products.”

There are engagement, motivation, and retention advantages to offering flexible pay.

In the Zellis report, 30% of employees saw flexible pay as one of the top three ways in which their employer could better support their financial wellbeing. Younger workers are most likely to see flexible pay as valuable.

Offering earned wage access along with other financial wellbeing services can help organisations to fill shifts, perhaps because employees are more willing to do overtime when they know they will receive pay more quickly.

Employees with fluctuating earnings (such as hourly paid workers) can also smooth out peaks and troughs between pay periods, reducing potential cashflow problems.

“Earned wage access is rapidly increasing in popularity across Europe and especially in the UK as more employers become aware of its benefits. Greater flexibility in pay can help financial wellbeing. For example, if someone is able to access some of their money when they need it during the month, it dramatically reduces their reliance on expensive loans or credit cards and allows them to feel more in control.”

David Roberts, Principal Product Manager — Fintech, Zellis

Conclusion: Provide resilience and flexibility

Payroll offers a major opportunity for employers to deliver impactful financial wellbeing measures and drive higher levels of engagement and retention. You can do this by helping employees to build savings for emergencies and greater resilience. Providing greater flexibility in how and when people receive pay also helps them to cope with unexpected financial pressures.

Key takeaways

• Financial wellbeing support is highly valued by employees, with 94% believing employers should provide such assistance through various measures.
• Payroll deduction savings plans are the most requested financial wellbeing feature (wanted by 41% – 52% of employees), as they enable automatic, effortless saving directly from earnings.
• Flexible pay (earned wage access) allows employees to access a portion of their earned wages before payday, reducing reliance on expensive borrowing options and improving financial control.
• Implementing financial wellbeing initiatives like payroll savings and flexible pay creates a competitive advantage for organisations, helping to attract and retain talent while improving employee engagement, productivity, and performance.

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