Flexible pay: 5 ways your business can save money by paying employees on-demand
The impact of COVID-19 has caused a mass exodus from workplaces with lounges, dining rooms, and kitchens becoming the new workspace for many. The need to juggle caring responsibilities while working created an urgent need for alternate working patterns and employers rose to the challenge.
Flexible working can take many forms, including part-time working, compressed hours, job-sharing, and remote working. The pandemic further strengthened the demand for flexible working that had been running in the background since it became legal for all employees to make a flexible working request (not just parents and carers).
Why do employees love flexible working?
Flexible working has many benefits but in some cases it can be a real lifeline. For example, flexible working can be hugely beneficial for workers with caring responsibilities or mental health problems such as anxiety.
The flexibility in when (and often where) people work their hours helps them retain a high-degree of control over their working lives. This allows them to leave space for other aspects of their lives to achieve a healthy work-life balance.
Parents in particular place high value on flexible working. For example, flexible arrangements such as staggered start times can help parents manage childcare responsibilities more easily.
When it comes to working from home, not having to commute means nursery or school drop-offs and pick-ups are more achievable and allow parents to spend more time with their children.
On-demand working is the new flexible working
The firmly established view of flexible working largely revolves around when workers do their work. More recently, remote working is also edging into this space with many companies announcing their commitment to building a ‘remote first’ workforce.
The rise of the gig economy, which includes companies like Uber, Deliveroo and Yodel, has created a new concept: on-demand working.
On-demand working allows workers (who may be temporary, contract firm workers, or independent contractors) to decide when to work. This allows them to create a work schedule that fits their life, rather than having to fit their life around work.
This highly flexible way to work gives workers the freedom they crave to live the life they want. If they need to work less, then they can. Equally, they can pick up more work as the need arises, for example if they need some extra funds or have more time to spare.
Flexible pay: The missing ingredient
Despite large swathes of UK employers supporting flexible working arrangements, this flexibility does not extend to the way employees are paid. The vast majority of employers pay their employees on a monthly basis.
When it comes to salaries and wages, most companies are extremely rigid with how often they pay their employees.
So why are employers open to flexible working, but overlook flexible pay?
The benefits of flexible pay for employers
By extending the flexibility you already give your employees to the way you pay them, you are promoting the financial wellness of your employees. Not just that, you’re also opening the door to many other benefits that will help to reduce your business costs.
Here are the top 5 reasons why offering flexible pay makes sound business sense:
1. Attract talent by standing out from your competitors
Integrating on-demand pay as one of your employee benefits is a great way to stand out from others in your sector.
Although financial wellness may have strong links to levels of pay, when you want to attract the best talent then the salary on offer isn’t everything. In highly competitive industries, having attractive benefits can nudge more candidate in your direction.
Companies that show that they care about their employees are more likely to attract the very best when it comes to talent. Good news travels, so if you’re offering a great benefit then candidates and existing employees are likely to share this information.
The key takeaway here is are that on-demand pay can help you recruit more easily, because it’s a new benefit that many employers haven’t explored fully yet.
2. More engaged employees help increase retention rates
You already know that retaining your employees is hugely important for minimising recruitment costs. Creating a culture that encourages your employees to stay is a big win for your business.
By offering on-demand pay, you will be openly demonstrating that your business cares about employee financial wellbeing. Employees love to feel looked after by their employers, and it will promote a positive attitude towards you as their employer.
As positive feelings increase, employees become more engaged. This leads to them committing to your business and much more likely to stay. Retaining talent saves on recruitment costs but it also makes it easier to put succession plans in place.
3. Regular reward for pay creates happier, more productive employees
For your business to operate efficiently, it relies on your employees being productive. Poor productivity causes your business to lose money. This is either because tasks remain incomplete or because you need to increase your workforce to complete them.
Common sense dictates that when your employees are distracted then their levels of productivity fall. What bigger distraction than the worry of not being able to pay for essentials like food and rent?
A lack of financial wellbeing can see employees disappearing to make personal calls when they should be working. It can also see them generally unable to concentrate, known as ‘presenteeism’.
On-demand pay allows employees to access a portion of their gross monthly salary that they’ve earned so far, meaning that they are less likely to feel stressed about money. This increase in financial wellbeing has a positive effect on productivity too, which is great news for your business.
4. On-demand pay reduces absenteeism
Employees who are under financial stress are more likely to be absent from work than those that are financially well.
There is a link between financial pressures and instances of anxiety and depression. These are both conditions that can lead to long term absence. The cost implications to a business can be significant.
So when it comes to money worries, then on-demand pay can really make a positive difference. Employees who can access their money when they need it feel more in control of their financial situation.
Money worries can be extremely damaging to individuals and lead to increased levels of absenteeism. This is especially true among those who experience mental health problems like anxiety and depression as a result of poor financial wellbeing.
It has been reported that in 2020 alone, absenteeism cost UK employers £14 billion. What’s more, almost a fifth (19%) of employers reported an increase in absenteeism attributable to poor financial wellbeing (Close Brothers’ Financial Wellbeing Index 2019).
As well as the cost implications, the absence of your employees impacts those who remain at work. Colleagues may have to pick up the slack and cover for those who are absent. This can place increased pressure on your employees and can create problems for your business too.
5. More financially resilient employees make better business decisions
With on-demand pay (also known as a salary advance and earned wage access), employees can get paid in smaller amounts more frequently, accessing their earnings as they need them. This can help employees avoid the need to turn to credit cards and payday loans when an unexpected financial requirements comes up.
On-demand pay enables employees to cope with financial shocks, like suddenly needing a large amount of cash for something they didn’t see coming. Being financially resilient translates to your business, too.
Having a can-do, positive and resilient frame of mind helps employees focus on their work, with higher levels of concentration. That means costly mistakes are far less likely to happen.
An overall boost to your business
It is clear that by engaging with employees about their finances you can benefit your business. Concentrating on the financial wellbeing and financial resilience of your employees allows them to create better financial habits.
In turn, you will create a healthier, happier, and more productive workforce. The areas where your business can benefit are all tangible in their results and give a sound business case for implementing change.
How to offer your employees on-demand pay
Businesses tend to offer monthly pay because:
1) This is what they have always done and;
2) Because it suits their existing systems and processes.
However understanding the potential gains from offering a more flexible pay strategy is vital for forward-thinking employers. Couple this with a solution that costs employers nothing and doesn’t affect cash flow, then on-demand pay suddenly becomes very interesting.
Openwage is simple and free for employers
Using Openwage doesn’t cost your company anything. There is zero cost to your business and employees only pay a small fee. Importantly, there’s no impact on your cash flow because we fund all payments to your employees.
Employees can access up to 50% of their gross monthly salary. So if an employee is one week into their pay period, then they can access up to 50% of what you have earned for that week.
Want to know more?
If you want to know more about how adopting a more flexible pay strategy can help your business reduce unnecessary costs, arrange a call with us by getting in touch.
Linkedin
Instagram
Twitter
Facebook