On-demand pay, also known as earned wage access, is a US innovation being widely adopted in the UK by sectors with traditionally high staff turnover. The idea is this: if you can’t pay more, pay more often. The tech providers claim tangible benefits that include lower staff turnover, more shifts filled, lower absenteeism, and the costs are very low.
Framing the problem
Workforce costs were the most significant financial pressure for adult social care providers in 2023, with many providers reporting that local authority fees didn’t cover the cost of the national living wage. Staff turnover is at a rate of one in three, with many of these care workers moving into retail and the NHS. It’s therefore becoming ever more important to look at solutions to recruitment and retention besides increasing pay.
How does on-demand pay work?
With traditional pay, if an employee earns £500, say by doing extra shifts, they don’t get that money until pay day. With on-demand pay, there’s no delay between doing the work and getting paid: once the employee has earned the money, they can go onto the app, and withdraw a percentage of their balance. The technology provider pays out the £500 cash and then recoups it from you – the employer – on payday, meaning your cashflow isn’t affected. The employee pays a small flat fee to withdraw – typically £1.75-£2.75. The employer pays a low annual fee which can be as little as £3k for a small-medium size provider. The employee can only withdraw money they have earned so there’s no danger of paying them more than they’re entitled to – this is not advance payment, it’s faster payment. However, to give a little margin for error, you would typically only give access to 50% of earned money. It’s also very simple to suspend the service as part of your offboarding.
Financial wellbeing for your staff
By allowing staff to access their earned income at the point that they need it – to pay for a costly car repair for example, or a child’s school trip – you’re reducing their reliance on high-cost, short-term credit, which can lead to debt, worry and absenteeism.
A long-term staffing solution
When you have short-term staffing problems you ideally want your existing staff to take on extra shifts. If they know that they can access the money almost at once it can be a big incentive to take on those shifts. Your staff can work on a Wednesday and access payment on a Thursday! This can significantly reduce your reliance on agencies in the long-term.
Increasing staff loyalty
It’s thought that 50% of all employers now offer on-demand pay to help them recruit more easily, including Tesco, Asda, Aldi, the NHS, and big-name care providers and agencies, which means it’s fast becoming a must-have benefit. If the sectors that we compete with for staff are embracing on-demand pay, we need to too.
One warning: staff on state benefits
Staff on state benefits need to be aware that accessing earned pay early could interfere with their eligibility for benefit payments. It’s important to know your staff and their situations.
How long does it take to set up?
Tech providers say they can set you up in 2-3 weeks, using your existing payroll systems. On-demand pay is an employee benefit, not a big piece of digital transformation. Some providers are focused on the social care sector and will already be integrated with e-rostering systems that you might be using, which gives further benefits.
Choosing a reputable tech provider
The Financial Conduct Authority (FCA) recommended a Code of Practice be written setting out the standards of delivery for Earned Wage Access (EWA) that consumers can expect on using this service. Find a trusted provider of EWA who is signed up to the Code of Practice here.
More info
Everything you need to know about On-Demand Pay – Care England