Assessing the impact of earned wage access and workplace loans
Having an accessible savings buffer can protect people from problem debt and anxiety, and there is evidence that this also boosts productivity at work. But in the absence of savings, what are the options for people who need affordable access to money to bridge a gap, manage an unexpected expense or to access an opportunity?
A growing number of employers are considering the role that they might play in supporting the financial wellbeing of their employees in light of recent economic pressures. Workplaces can be a powerful channel for reaching people where they are, and employers can be trusted intermediaries for those who might otherwise not seek out solutions from the market directly. Payroll also provides an opportunity for setting up and automatically making payments, whether for saving or borrowing. Among employers’ options for supporting their employees are offering earned wage access (EWA) solutions, which allow employees to access some of the pay they have already earned before payday, and various kinds of loans that can be made available in the workplace.
Credit Unions have worked with employers for many years to provide access to loans via payroll. More recently there has been considerable fintech innovation in this space, with newer providers offering different packages of solutions including loans and the creation of earned wage access as an employee benefits category. Evidence of the relevance and effectiveness of these solutions is evolving and remains patchy. As a result, it can be difficult for employers to weigh up the different options available.
Our initial exploratory research sought to bring together the existing evidence that is available and to reflect the viewpoints of different stakeholders – those of low- and moderate-income employees themselves, employer decision-makers, providers and industry and consumer experts. By doing so, we’ve built an in-depth understanding of how earned wage access and workplace loans are used, what the benefits and risks are, how they compare to other financial wellbeing interventions offered through the workplace, and whether these two options are likely to be scalable across a significant proportion of the UK labour force.
Read our report: Bridging financial gaps for workers (PDF).