Early December pay makes a gloomy January?
James Herbert, CEO of Hastee Pay asks whether employers who provided early December pay have shot themselves and their workforce in the foot.
We all appreciate a Christmas gift. Some employers go as far as gifting their employees with an early December pay day, recognising that many workers could benefit from additional funds during the financially demanding Christmas period.
Considering that employers don’t have to bring December pay forward, it’s a generous gesture. However, what many don’t understand is the increased financial burden this can bring their workers in January. Depending on the date chosen for the early Christmas pay packet, some workers are left to wait for over five weeks until they can access their January pay.
This lengthy wait only drives employees to rely on other sources for funds and opens the opportunity to fall into a dangerous cycle of debt. The latest research from Hastee Pay reveals that workers in the UK and Ireland are five times more likely to use high-cost credit in January compared to December as a result of the longer wait for their pay.
Monthly paid workers are twice as likely to use high-cost credit than those who are paid weekly. Clearly those with more frequent access to pay find it to better to manage their finances and avoid costly borrowing. Those who are paid monthly are also seven times more likely to use their overdraft in January rather than December.
This leaves employers with a predicament – how can they help their workers cope with the financial demands of the Christmas period without making them more at risk financially?
The impact on business productivity
To balance their incomings with their outgoings, 48 per cent of workers work overtime to save extra money before the Christmas period. This could be perceived as a bonus for employers who could benefit from the increased productivity. However, the research suggests that those dealing with financial stress are actually more likely to negatively impact business productivity with 24 per cent of workers claiming they have difficulty concentrating at work due to financial stress.
Working overtime to balance incomings with outgoings in preparation for Christmas is more prevalent for those aged 18-24 compared to any other age group. Given that more than half of the workforce will be represented by millennials and Generation Z by 2020, employers must consider other ways to help ease the financial on their workers or risk poor productivity from a significant growing per centage of the workforce.
A year-round issue
The financial plight of the workforce extends well beyond the spending demands of the Christmas period. The research also highlights that financial strain isn’t just focussed on Christmas and throughout January, but throughout the entire year. 87 per cent of the survey’s respondents say that they have had to cover unexpected costs in the last 12 months.