# Scrapping outdated payday cycles to battle record-high inflation
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-05-13
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: How Earned Wage Access Can Improve Financial Wellbeing in
Meta Description: Discover how Earned Wage Access empowers employees to manage cash flow, breaking cycles of financial anxiety and high-interest payday loans.
URL: https://financedigest.com/scrapping-outdated-payday-cycles-to-battle-record-high-inflationhtml

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_By_ **_Steve Tonks,_** _Senior Vice President EMEA at_ [_WorkForce Software_](https://www.workforcesoftware.com/)

[48%](https://moneyandpensionsservice.org.uk/2020/11/11/shame-upbringing-and-burdening-others-why-29-million-uk-adults-dont-feel-comfortable-talking-about-money-despite-feeling-worried-about-it/#:~:text=The%20research%2C%20which%20surveyed%20over,more%20in%20the%20last%20month) of the UK population frequently feel monetary stress, with financial anxiety being a leading cause of poor mental health for three fifths ( [60%](https://www.barnett-waddingham.co.uk/comment-insight/news/money-worries-causing-mental-health-problems-for-more-than-half-of-uk-employees/)) of employees. It is clear that financial wellbeing has a domino effect on mental wellbeing. Combine this with rising living costs, that show no signs of slowing down, it is no surprise that a [third of low-income households](https://www.theguardian.com/money/2021/oct/21/third-of-low-income-households-unable-to-pay-bills-finds-research) are struggling to pay bills every month, up threefold compared to pre-pandemic.

If we were to put this into perspective, that’s a third of 11.6 million working-age households in the UK, earning £25,000 or less, struggling to pay their rent or mortgage, utility bills, council tax bills or personal debt repayments. The Joseph Rowntree Foundation (JRF) rightly highlights that “behind these figures are parents gripped by anxiety, wondering how they will put [food](https://www.financedigest.com/average-annual-uk-food-bill-set-to-rise-454-pounds-as-inflation-soars.html "Average annual UK food bill set to rise 454 pounds as inflation soars") on their children’s plates and pay the gas bill,” and “young people forced to rely on friends to help cover their rent and avoid eviction.”

Now imagine this struggle on top of the growing fears of food poverty, with grocery price inflation reaching [5.9 per cent](https://www.cityam.com/households-now-face-extra-271-to-food-bill-as-grocery-inflation-tops-decade-high/), the highest level since December 2011, it is inevitable that the most affected by these hikes will be low-wage, hourly workers – many of whom are frontline.

For low-income and hourly workers, lunar pay cycles can be particularly stressful, as there can be up to eight weeks of elapsed time between when [hours were worked](https://www.financedigest.com/madrid-street-sweepers-death-prompts-curbs-on-heatwave-working-hours.html "Madrid street-sweeper’s death prompts curbs on heatwave working hours") and when payment is received. As a result, many workers are forced into high-interest payday loans to make it through the month. Although the UK’s Financial Conduct Authority has stamped down on the most onerous payday loan terms, [young people and women](https://assets.publishing.service.gov.uk/media/5329df8aed915d0e5d000339/140131_payday_lending_tns_survey_report_.pdf), in particular, are still turning to these lenders to manage their living expenses.

In an uncertain economic environment, where corporate energy bills continue to rise and inflation is at its [highest in thirty years](https://www.independent.co.uk/news/business/uk-inflation-rate-ons-latest-b2016173.html), many business leaders will struggle to align employees’ financial wellbeing with genuine fiscal concerns of the business. Yet, that [doesn’t mean](https://www.financedigest.com/making-sure-that-finservs-digital-transformation-doesnt-mean-digital-exclusion.html "Making sure that FinServ’s digital transformation doesn’t mean digital exclusion") organisations are powerless to respond. Earned Wage Access (EWA) provides a simple yet highly effective [way to improve](https://www.financedigest.com/5-ways-to-improve-your-business-finances.html "5 Ways to Improve Your Business Finances") the employee experience, while helping workers to better manage their finances both in the short and long term. But what does this look like in practice?

**[Breaking cycles](https://www.financedigest.com/breaking-out-of-the-banking-bonus-cycle.html "Breaking out of the banking bonus cycle") to initiate the change**

An EWA payroll scheme enables employees to access their wages before payday, empowering them to better manage their [cash flow](https://www.financedigest.com/should-your-business-reconsider-invoice-financing-top-tips-on-why-reappraising-this-method-liberates-business-cash-flow.html "Should your business reconsider invoice financing? Top tips on why reappraising this method liberates business cash flow") and avoid the high-interest payday loans that act as a contributing factor to financial anxiety.

Fortunately, for employers, the [technology behind](https://www.financedigest.com/what-is-generative-ai-the-technology-behind-openais-chatgpt.html "What is Generative AI, the technology behind OpenAI’s ChatGPT?") EWA is quite simple – and it involves capturing an employee’s daily worked hours and processing payments based on the rules that apply to that day. This is best achieved through a [workforce management](https://www.financedigest.com/6-keys-to-managing-a-remote-first-workforce.html "6 Keys to Managing a Remote-First Workforce") (WFM) solution, specifically one that can seamlessly integrate with existing payroll systems or third-party payroll providers.

By leveraging modern, cloud-based WFM technologies _,_ [employers can combine timesheet data with automated pay](https://www.financedigest.com/uk-employers-see-slight-fall-in-pay-awards-over-2023-xperthr.html "UK employers see slight fall in pay awards over 2023 – XpertHR") rules to ensure accurate and timely payment. Most importantly, [automating the payment approvals process](https://www.financedigest.com/how-process-automation-increases-productivity-in-the-insurance-sector-while-giving-employees-room-for-more-high-value-activity.html "How Process Automation increases productivity in the insurance sector while giving employees room for more high value activity") will ensure that the cut off for hours, especially overtime hours, can be paid during the period in which they were incurred. This will not only [shorten the time gap between when hours are worked](https://www.financedigest.com/low-use-of-shortened-work-hours-points-to-mild-german-recession-ifo.html "Low use of shortened work hours points to mild German recession – Ifo") and when employees are paid, but also streamline and simplify payroll operations. This should be a welcome change for employers, who [waste over 100 hours](https://fundsquire.co.uk/how-much-does-payroll-cost-companies-percentage-by-industry/) manually managing their payroll each year.

At a time when low-income, deskless workforces – including healthcare workers, retail staff and delivery drivers – are facing [living costs hit a 30-year high](https://www.bbc.co.uk/news/business-60390527), employers have a responsibility to help break outdated pay cycles.

With many UK companies [currently facing](https://www.financedigest.com/peel-off-face-mask-market-2022-outlook-current-and-future-industry-landscape-analysis-2029.html "Peel off Face Mask Market 2022 Outlook, Current and Future Industry Landscape Analysis 2029") an employee retention crisis, the ability to foster loyalty through EWA should not be disregarded. Encouragingly, [research](https://pages.americanpayroll.org/earned-wage-access-report) suggests that a thoughtfully implemented EWA programme can lead to a measurable improvement in employee satisfaction. Meanwhile, more than a third ( [38%](https://wealth.barclays.com/global-stock-and-rewards/en_gb/home/research-centre/financial-wellbeing.html)) of employees would consider moving to a company that makes financial wellbeing a priority.

As we dive headfirst into the challenges 2022 has to offer, it has become clear that for [businesses to remain](https://www.financedigest.com/iran-open-for-business-but-caution-remains-the-watchword.html "Iran: ‘open for business’ – but caution remains the watchword") successful in their recruitment and retention abilities, organisations must invest in WFM technologies, offering EWA capabilities to struggling staff during these times of financial uncertainty.

However, EWA shouldn’t be a ‘nice-to-have’ during [times of economic](https://www.financedigest.com/building-economic-resilience-in-tough-times.html "Building Economic Resilience in Tough Times") upheaval. Instead, it should be viewed as a long-term CSR goal for organisations, [supported by ongoing employee education and advice on money management](https://www.financedigest.com/how-to-manage-burnout-and-how-leaders-should-support-employee-wellbeing-tom-keya.html "How to manage burnout and how leaders should support employee wellbeing | Tom Keya"). In a nutshell, companies that [promote and adopt a culture](https://www.financedigest.com/promoting-a-learning-culture-in-the-workplace.html "Promoting a learning culture in the workplace") of financial wellbeing and support will, in the end, gain a competitive advantage and long-term employee loyalty.


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