Economic insecurity for employees seems to be on the increase with 40% of the UK’s working population (across all demographics) a single missed pay cheque away from severe financial difficulty. Covid-19 has only added fuel to this fire, making the financial situations of many more precarious.
Low-paid workers are disproportionately affected by financial instability. In the retail sector, some 28 per cent of workers are classed as low-paid, many of whom (especially in non-food retail businesses) have been further impacted by the pandemic.
In the UK, the proportion of workers paid weekly has shrunk over time, and the number paid monthly has ballooned in its place. A Resolution Foundation report published in June 2020 revealed “in 2000, around half of the lowest earners were paid weekly or fortnightly, with the other half paid monthly. Now just 17 per cent are paid weekly, while three-quarters are paid monthly”. The result is that 774,000 more workers are now paid monthly, which the report finds “has a substantial impact on cashflow, with workers in effect lending their employers considerable amounts of money. That cashflow matters to families as much as firms – indeed, potentially more so, given that it costs workers more to borrow than firms”.
The “waiting for payday” phenomenon may contribute to workers spending nearly half of their disposable income (43 per cent) within 24 hours of being paid, and often, not surprisingly, running out of money before the next payday comes around. Stuck in a bind, many are forced to turn to credit cards and high-interest payday loans to cover expenses for the remaining period until payday. It is little surprise then that 94 per cent of UK employees are suffering from money worries.
New model for a “new normal”
While outdated technology has kept some businesses stuck firmly in the past when it comes to payroll, the world of work is changing and advances in cloud and human capital management (HCM) mean the possibility of real-time pay has come a long way. Today, on-demand pay systems are disrupting the basic concept of how and when we get paid with earned wage calculated in real-time (net of taxes and deductions). And as we emerge from a post-pandemic world could be one solution to the retail sector’s recruitment problems. Companies subscribing to these solutions enable workers to be paid more frequently as needed based on work done, without waiting for payday.
Such changes would allow staff to pay bills sooner, use money they have already earned for expenses they may need to cover (instead of borrowing), enable immediate access to funds in an emergency, and overall provide employees with far greater financial control. It puts the employee at the centre of the work experience by offering the ability to be paid in line with the pace of their real life.
A two-way street to success
Employers stand to benefit, too. Over three-quarters of Brits say financial worries are a distraction at work. In addition, lack of pay transparency and flexibility are proven to increase staff turnover which then results in higher costs spent further down the line on recruitment and training.
Giving employees more power when it comes to their money will lead to a more engaged workforce with less absenteeism, lower levels of turnover and a more attractive offering for recruiting and onboarding new talent. On-demand pay is also proven to be a hit with younger workers, who make up the vast majority of the retail workforce, and could be a critical way to secure and keep staff post-pandemic. Ceridian data shows that customers using on-demand pay solutions have 40% lower voluntary staff turnover and five per cent higher close rate in recruitment efforts.
Future-proofing for the unknown
As the UK has gone in and out of lockdown, the retail workforce has taken a huge hit with many staff forced to retrain in other industries to make ends meet. With shops reopening and business ramping up both on the high-street and online, it will be critical for retailers to entice staff back to the industry as they seek to make up for lost time.
The retail industry is no stranger to change and the need to evolve to stay relevant and successful. The technology to pay employees on-demand is gathering momentum thanks to the benefits it offers. Thinking beyond typical pay periods and giving employees the trust, freedom, and flexibility to access their earned wages will increase employee engagement and retention, positively impacting the customer experience and employee wellbeing.
As an industry, it is on retailers to meet the expectations of the modern workforce. Investing in setting up these processes for the future is a move which will benefit both staff and business alike.
Wendy Muirhead is the VP at Ceridian Europe