The Product team reflect on the evolving best practice of employee financial benefits, and the role of credit in building a financial future
In a past blog post, the Wagestream product team shared an update on the lessons we’d learned so far - and our ambitious plans to expand the range of benefits we make available to workers.
By then, around three hundred organisations had started using the platform to power financial benefits for their employees. Just over two years later, we’re incredibly proud to have more than 1,000 organisations using the platform to support more than 3 million colleagues across Europe and the United States.
More importantly, those employers have become powerful change-agents. Collectively they drove incredible outcomes for frontline and shift workers last year - helping them build financial resilience in the short-term and begin building financial foundations for the future.
An evolution in best practice
With so many more employers now prioritising financial reward and benefits, it’s been fantastic to see academic teams and industry bodies curate learnings and steer the beginnings of ‘best practice’ for employer financial wellbeing programmes. You can find a range of examples over on the Wagestream-supported Financial Wellbeing Forum.
One particularly helpful report, Bridging Financial Gaps for Workers, was published by Nest Insight - UK Government’s arms-length body for pensions and savings. The report explored the potential for two popular benefits - flexible pay (Earned Wage Access) and workplace loans - to improve low and moderate income employees’ financial wellbeing.
With this segment representing more than half of the working population, the report is significant - because it charts the six key financial footings that capture the financial needs of low-and moderate-income workers, all of which have clear entry points for employer-driven solutions.
It’s a great model for thinking about the different stages each worker may be on their financial journey, and the different needs they have along the way.
Different support for different needs
At Wagestream, we’re proud to have pioneered the rise of flexible pay as a popular employee benefit, which is now proven to be a fantastic tool for improving financial resilience.
Why?
- It reduces the premium paid by frontline and volatile-income workers for essential services: when people have greater control over their pay frequency, they are often able to avoid dramatically more expensive scenarios - like the consequences of missing a bill, or turning to a high-cost form of credit
- It helps people manage unpredictable income: 35% of Wagestream members have income fluctuations that means they sometimes can’t pay their bills
- It helps people cope with financial shocks: 76% of Wagestream members use flexible pay for bills or essential purchases
We often hear anecdotally that workers find it useful to have ongoing, long-term access to flexible pay - and that they simply prefer to use it as part of their financial toolkit. This plays out in the data, too: many use it to get to work, for example, or to access pay each time they work an overtime shift.
However, we also know it’s most commonly preferred because of short-term needs. Either way, it’s true to say flexible pay was never designed specifically as a long-term financial planning tool - to help with things like owning a car or buying a first home.
Meanwhile, we’ve been working on new ways to help people save - starting with ‘micro-savings’ linked to shifts, and more recently piloting auto-enrolment savings with employers like Bupa and Co-op. The core focus has been helping people build resources for the future with rainy-day pots - which workers used to set aside more than £45million last year.
But the emerging research and best practice suggests that a blend of flexible pay, savings tools and credit offers a more complete financial wellbeing toolkit. That’s in addition to the range of other ways we’ve continued expanding the toolkit - from discounts on shopping to personalised money coaching.
Helping people climb the financial ladder
In recognition of this emerging best practice, we welcomed Keebo - a financial inclusion startup focused on credit - to the Wagestream group last year.
Thanks to their deep expertise, and a successful pilot with around 200 employers, we’re now confident that flexible, fair, educational forms of credit will be able to help meet three needs that we’ve never been able to meet before:
- Access the financial system, meaningfully, for the first time. For millions of people in the UK, this is a crippling problem: the lack of a credit file means an inability to access fairly-priced basic services - like overdrafts, mortgages, utilities and insurance. or in some case, an inability to access them at all. Around 15% of workers with access to financial benefits through Wagestream have this problem
- Plan for the future by financing larger one-off purchases beyond earned wages or savings, such as a holiday, school uniform, or a house-move
- Save money, by consolidating existing debt repayments. We know 8% of Wagestream members today are making repayments to loan providers with representative APR of 50-100%. A further 4% are making repayments with a representative APR of 100-1000%. Refinancing that debt could save our members thousands of pounds in interest repayments.
Alongside the range of financial tools and support already available, we’ll soon be rolling out multiple new benefits to the Wagestream platform to meet these needs - with accessible, educational, flexible types of credit designed to support positive financial journeys.
Employers keen to offer benefits like this to their colleagues can reach us through the Wagestream homepage, and existing clients can find out more through their usual client success contact.
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Wagestream Finance Ltd is a company registered in England and Wales (No. 12227891) at 7-9 Rathbone Street W1T 1LY, authorised and regulated by the Financial Conduct Authority for consumer lending (FRN: 915914) and for the provision of payment services (FRN: 916866) under the Payment Services Regulations 2017.
