Salary finance has helped thousands of employees in the UK and has become an increasingly popular alternative to high cost loans and a valuable employee benefit that companies can offer to their staff - something that we reported on last year.
Today, every company feels like they should be offering some kind of employee benefit, whether it is health cover, child care assistance, life insurance or help with personal finances. Whilst we cannot expect an employer to offer everything on the table, salary finance is certainly one to consider in the mix.
With a handful of providers such as Hastee, Wagesteam and Salary Finance, this process allows employees to draw down their wages in real-time, just in case they need money upfront for an emergency or to help stay on top of their bills.
So rather than waiting for your wages to come in at the end of the month, if you have worked 10 or 14 days of the month already, you can draw down this money immediately and use it for your emergency or expenses.
For the employee, this is hugely beneficial, not only can you get money sooner than later, but this facility is completely interest-free, with the cost incurred on the employer who pays £1-£2 for every transmission and a monthly fee to the provider - and this is seen as a benefit in kind.
Startups offering this service have highlighted the importance of helping staff with their financial woes, since this can have a direct impact on their morale, productivity and attitude around the office. “If people do not feel a financial burden, they are more likely to enjoy their work and feel less distracted,” explained one founder.
Salary finance is used by integrating a provider’s software with that of the employer, so it is smoothly processed between the HR and payroll divisions of a company. With thousands of people using salary finance so far, it is popular in industries such as nursing, construction and hospitality - and has even been adopted by university faculty, but it works well where rates are hourly and employees have expressed a preference to get paid weekly or fortnightly, rather than monthly.
Commenting on the growth of salary finance, Dan Kettle, founder of mainstream loans provider, Pheabs, said:
“Salary finance is very innovative and uses technology to help people get paid faster than their regular salary cycle - and fundamentally takes people away from high cost credit such as online payday loans and logbook loans.”
“However, salary finance should still be treated with caution, because nothing stops an individual taking out their salary early, but still coming up short for the month and then needing to take out additional loans and credit. In some respects, salary finance can accelerate an individual’s debt problem.”
“Fortunately, salary finance companies have a limit of how much you can withdraw each month, such as 10% or 40%, but colleagues should be carefully monitored to ensure they are not falling into bad habits with their finances or suffering from gambling problems or addiction which could be the route of their financial troubles.”