How to help employees avoid falling back on high-cost debt

Salary Finance’s survey found that 34 per cent of people regularly run out money before payday, impacting their mental health and performance at work. Find out what employers can do to help

Many people find budgeting a challenge. Salary Finance’s survey of over 10,000 UK employees found that 34 per cent of people regularly run out money before payday.

This ongoing financial stress has a negative impact on their mental health and performance at work. Our research found that people with money worries are:

  • 8.8 times more likely to have sleepless nights
  • 6 times more like to have a lower quality of work
  • 7.6 times more likely to not finish daily tasks

It’s not the amount you get paid, but what you do with it,  that determines your level of financial wellbeing

We use a financial fitness score from 1 (not in control) to 5 (financial freedom) to measure an individual’s financial wellbeing. We found that 82 per cent of those scoring 1 worry about their finances, compared to 8 per cent of those scoring 5. The higher the score, the greater the financial wellbeing.

However, it isn’t as simple as more money equalling a higher score. Almost a third of people with a score of 4 earn less than £25k, while a quarter of those with a score of 2 earn over £40k.

A new way of segmenting employees

We found that the distribution of scores is bi-modal. There are large spikes at 2 (no freedom to enjoy – 31 per cent) and 4 (plan in place – 41 per cent).

Another example of a bi-modal distribution is book prices on Amazon. There are peaks at $10 and $25, representing paperback and hardback book prices. They are both books, but a paperback is different from a hardback. Similarly, someone who is a 2 has a very different set of financial wellbeing needs than someone who is a 4.

What employers can do

Our survey showed that financial knowledge and behaviour varied depending on an individual’s financial fitness score. For some, providing access to pay as it is earned can be hugely valuable.

The ability to access what you have earned before payday could help avoid relying on debt to make it through the month, for example:

  • Dealing with emergencies: For the 16.8 million people with less than £100 in savings, something as commonplace as a car repair can cause a financial challenge.
  • Controlling pay frequency: Falling back on expensive credit increases by 18 per cent when there is less alignment between the timing of when pay comes in and bills go out.

As part of a financial wellbeing strategy that includes savings, education and affordable borrowing, more flexible access to pay can provide a foundation for improved money management and financial wellbeing.