Resolution Foundation: It is time to relieve the financial woe of monthly pay
For many, each passing payday serves nothing more than brief respite from the rigours of monthly financial worry. The bills come every week, but the wages drop just once a month.
We all rely upon our salaries in one form or another to ensure ends meet. But the stress and strain of guaranteeing there is enough left in the bank to tide you over can cripple even the most stringent of planners.
At Hi55 Ventures, we know it shouldn’t be this way. The benefits of weekly pay are stark, which is why we launched our unique new asset class, Pay Asset Finance, in a bid to allow employees the opportunity to unlock their salaries at the drop of a hat.
We are encouraged to see a number of well-respected institutions agree with our principles, with many in agreement that workers should have access to what they are essentially owed on a much more frequent basis.
The Resolution Foundation hit the nail on the head in their latest briefing, recommending “in large firms, workers should have the right to choose how regularly they are paid.” And they rightfully doubled down on this concept, highlighting that workers in smaller companies should also be involved in payroll decisions – and most significantly, the frequency of which they should be paid.
This would relieve the strain on the vast majority of workers across the country, with just 12% of staff currently paid on a weekly basis. This marks a seismic shift from the year 2000, when around half of the lowest earners were paid on a weekly or fortnightly basis, compared to 17% now.
This change highlights that an additional 774,000 workers who would have been paid weekly are now paid monthly – placing a significant cashflow burden on families, with workers in effect lending their employers considerable amounts of money until payday.
This cashflow issue is striking when you consider it costs workers more to borrow than firms. The average worker in the bottom weekly pay decile earns around £96 a week, therefore, on any given day they are owed on average £48 by their employer. Compare that to a massive £209 if they were paid on a monthly basis.
Most-strikingly, when we total up all the figure for every monthly-paid worker who would have been paid weekly two decades ago, it provides a stylised figure of £120 million increase being lent to firms just by the lowest 10 per cent of earners since 2000.
For too long now, business have used this model not only to their own benefit, but to the detriment of their workers.
As COVID-19 continues its stranglehold over all our finances, we believe it is time big business helped their employees when they need it most. Hi has the solution, and it’s about time business realises the problem.