The UK FinTech helping HRs improve mental health
Improving employee mental health has been a hot topic for boardrooms and HR practioners for years. But I think this is the first time I have come across a concrete solution that will cot HRs precisely nothing to implement.
Today, a salary advance fintech called FlexEarn has signed a deal with payroll software giant Sage. FlexEarn is an app that lets employees withdraw a portion of their salary before their regular salary payment date (and lets employers to authorise FlexEarn to pay the requested amount to their employees).
This is not another payday loan company: there are no hidden charges, credit checks, or interest. It just lets employees access the wages they’ve already earned in the event of an emergency.
Yada yada yada. Why is this important?
Well, employees will experience better financial wellbeing as a result, while employers will benefit from improved productivity and a financially healthier and happier workforce: 77% of employees say that money worries impact them at work and employers report losing 2.5 days per employee per year through financial stress-related absences. Staff turnover will also be affected - the EY Employee Financial Wellbeing Survey calculated that 20 per cent of staff turnover is attributable to financial stress.
Mai-Po Wan, a spokesperson for Sage, said: “Our software helps businesses to pay and engage their employees, in a simple, secure and accurate way. This partnership takes this one step further and allows employers to support their employees’ financial wellbeing, by giving them access to their wages when they need them, helping them to manage their finances with less stress. This is a great example of how the country’s businesses can use technology to improve employee health and wellbeing.”
In April, research from debt charity StepChange revealed that more than 14 million people had suffered a hit to their income which had affected their ability to pay for essential costs since March 2020, as a result of the pandemic. 11 million of those affected said they were still struggling to meet those costs. The research highlights how the pandemic has exhausted coping strategies and eroded financial resilience, increasing people’s likelihood of falling into problem debt.
Jonathan David, the founder of FlexEarn said: “A financial health crisis is afflicting the UK workforce. Earned Wage Access schemes can provide people with earlier access to their earnings and help them beat the cycle of debt, by preventing the need for costly alternatives such as payday loans. FlexEarn can help them avoid accruing debt by allowing workers to smooth their income and access their earnings at more frequent intervals. We are now positioned to implement this across the UK. "
Given Sage is used to pay a quarter of employees working in the UK, I'd say this represents a step change for the UK's salary advance industry - and, potentially, the mental health of the UK's workforce.
This is also a coming of age story for something of a slightly sordid Wild West sector that the FCA has spent some time looking into recently. David Cameron was busted lobbying for Earnd (part of Greenhill). Wonga's backers seem to be heavily involved with another big provider. And another operator is paying employees in vouchers, rather than cash - which makes it harder to argue it's for emergency use. But here we have a provider partnering with a blue-chip business like Sage - a salary advance firm with a referral partnership with debt charity StepChange (you're judged on the company you keep). And, unlike some of its peers, FlexEarn does not charge a percentage fee of the amount an employee is advanced - employees pay a flat £1.50 fee per withdrawal and access their own pay packet in advance.
It's a very concrete solution to a very real problem.
And last, but not least, at this sort of scale, FlexEarn might put the last of the payday lenders out of business. And that's something everyone can celebrate.