Insights

What happens if people can choose when they get paid?

13 Feb 2024

3 min read

We asked two employers who made the switch - and one researcher who spent months analysing it.

In 18 months, the idea of flexible pay - allowing employees to choose their own pay frequency, also known as Earned Wage Access (EWA) - shifted from ‘hotly debated’ to ‘hot HR trend’. Why?

“In the end, it was in the data” says Emily Trant, Chief Impact Officer at financial benefits provider Wagestream.

She refers to the fact that longer, frozen pay cycles were only introduced in the 1960s to save employers time and money: “research already showed the shift to frozen pay cycles had created challenges for half of the workforce. But we didn’t have data on what happened when the change was reversed. After a decade of employers paying more flexibly, there’s a growing field of research unpacking how it changes employee experience and day to day life.”

Trant was speaking on a panel at the 2023 Financial Wellbeing Forum, in a session exploring what happens when employees can choose their own pay cycle.

Pay, employee experience, and customer experience

“I get paid the same day every month; I know my direct debits come out the day after; easy peasy” says Katie Bupa - Head of Pay and Reward Services at Bupa. “But we were paying our care home employees on a four-week, four-week, five-week cadence. We were asking them to budget on this strange cadence, and unsurprisingly getting requests for an advance in the five-week cycle.”

After counting out complex options like moving the whole business to weekly pay, Duxbury stumbled on flexible pay as a way to solve the problem. Bupa began rolling it out in 2021, and a large proportion of its frontline employees now take up the option.

“Care workers often have choice. We want them to take their next shift with us - continuity of care is so important. So there’s a competitive advantage, in being able to offer this”, says Duxbury.

Ana Laiu - fellow panelist and Director of Pay and Reward at PPHE Group - suggests that link between customer experience and employee experience is tangible, and tangibly improved with flexible pay. PPHE Group began offering its employee base the option of flexible pay in 2022:

Key takeaways

Flexible pay

Forgoing restrictions around accessing pay is proven to drive more predictable behaviours

Frequent pay

Shortening the gap between work and pay minimises the 'cashless effect', so people think harder about their spending

Inclusive pay

Exploring new financial benefits which reframe how workers get paid encourages employers to look beyond fixed pay cycles

The paternalism trap

It’s common for a technology-supported trend to grow out of something initially divisive. Flexible working, auto-enrolment pensions and working from home were all once controversial - and are now part of the backbone of modern working culture.

Decisions around pay cycles, in particular, forced boardrooms to think about their role as an employer, according to Laiu. “We needed to make a decision on whether we hand-hold employees, or actually empower them. It was the best decision that we made - to empower our employees and make sure that not only they have access to their earned wage, they also have other financial tools and the support that they need.”

Laiu also spoke about flexible pay as a trigger point for wider investment in employees’ wellbeing - echoing recent guidance from the Chartered Institute of Payroll Professionals (CIPP). “If you're enabling flexible pay in a responsible way…[for example] attaching financial education or ways to access support to consolidate debt, you're actually making a positive step in the right direction and saying, there's access to your pay - but also, here's help attached to it so you can drive better behaviours to get your debt under control and to educate yourself.”

That ‘self-help’ approach is becoming best practice, for employers switching to flexible pay. A recent University of California, Berkeley study recommended resisting the urge to offer it with heavy-handed, universal restrictions or limits. The study found that despite good intentions, universal restrictions create unintended behaviours and potential harm - and asking individuals to set their own personal preferences actually leads to more predictable behaviours.

Emily Trant, who spent months analysing flexible pay, also points to phenomena such as the Cashless Effect - whereby spending with physical cash drives fundamentally different behaviours to spending digitally. “Shortening the link between work and reward triggers a new way people think about the work they’re doing, and the money they’re earning. Particularly in some of our younger demographic. It makes them harder about their spending.”

Laiu agrees: “It's also empowered them and educated them about how does their work translate into pay. Understanding the link between the work that I do as a waiter, for example, and how that translates into pay, is monumental. That stays with them forever into the next role that they might be going with, but might not be with us.”

Creating these lightbulb moments is critical to getting flexible pay buy-in, according to Bupa’s Duxbury. “Sometimes you've really have to push the conversation. And maybe make people a little bit uncomfortable about their stereotypes around economic income.

If you've got an exec that is being particularly concerned about the ethical space that's a really good sign, because they're cogitating on it and they're thinking about what the pitfalls might be. It's a case of using that momentum to then talk about what the pitfalls are if you don't implement it.”

Bupa’s team of 84,000 helps 43 million people live longer, healthier, happier lives

Katie Duxbury, right, says employers should ask themselves “what happens if we don’t?” when considering flexible pay

From distress to dignity

“Flexible pay is not appealing to employers who want to bury their head in the sand” warns Trant.

“Millions are financially excluded; millions were financially squeezed by the pandemic; millions more have been hit by the rising cost of living. Many frontline workers are building lives around work that’s less flexible, less rewarding and less predictable than their head office colleagues. Offering new financial benefits like flexible pay forces a head office or executive team to confront that reality. That can be hard.”

PPHE’s Laiu points out it’s inevitable some employees in distress will continue experiencing financial distress, while being paid flexibly. “It's very unlikely that somebody behaves very well with their money and when they're given access to their wage flexibly, they become irresponsible with their finances overnight. Generally, people that will use this option irresponsibly are already in a very difficult position with managing their money.”

This echoes the findings of Trant’s recent project, ‘Unlocking The Pay Cycle’ - which studied thousands of UK workers choosing to be paid flexibly. It found that while flexible pay doesn’t create debt or cycles of negative financial behaviours, it can surface pre-existing financial stress.

Duxbury adds that this will be part of Bupa’s financial wellbeing strategy in 2024: “part of our strategy for next year, is to look at what data points we've got as a business to understand individuals that are in that financial distress space.

"We want to understand, where do their decisions come from? Where are their pressure points? At what point should we be, not intervening, but making sure that they're enabled through the various financial wellbeing benefits we offer? We've got our employee assistance line. We've also got one to one coaching (through the Wagestream app), and we're signposting that very heavily at the moment - especially around Christmas. There’s work to do, though.”

Duxbury points to dignity as a north star, whatever additional support they put in place. “We see a lot of benefit where individuals recognise that Wagestream is a third party. They're not even having a conversation necessarily with an internal buffer person and we keep our financial wellbeing reporting very broad and very theme based. So there's no inference at all that we can get down into somebody's financial situation. We're preserving that level of dignity for those individuals. So those conversations can happen, but with a third party to get people to where they need to be.”

Katie Duxbury, Bupa, and Ana Laiu, PPHE Hotels, were featured in a panel discussion at last year's Financial Wellbeing Forum. Hosted by Emily Trant, the session explored: 'What happens when people can choose how often they get paid?'