January 15, 2021

The Best Salary Finance Schemes for Employees

Salary finance schemes” are a way for employees to withdraw their salaries in advance of payday. It is also a way for employers to provide financial assistance and increased financial security to their workforces. Though relatively new in the world of employee benefits, salary finance schemes have become an increasingly important incentive for today’s job hunters.

As working habits shift and employee priorities change, standard employee benefits packages and perks have to evolve to meet workers’ new needs. Thus, the option to access paychecks early is now a powerful incentive for attracting and retaining new talent, as well as keeping existing employees motivated.

The Benefits of Salary Finance Schemes

From an employee perspective, these schemes can be hugely beneficial, especially when unexpected payments or bills come due before payday. A salary finance scheme allows an employee to withdraw what they have earned to date when they need it, making surprise expenses easier to deal with. Employees who work in lower-paid sectors, who may struggle to make it until payday, could find these schemes especially helpful, as they offer a lower-cost alternative to payday loans and bank overdraft fees. Many employers with large workforces, such as hospitals, supermarkets, and the hospitality sector, are already making use of these salary finance schemes.

How Is Salary Finance Different From Payday Loans?

Salary finance allows people to withdraw their own money in advance. Employees are essentially receiving a down payment of their salaries before the official payday rolls around.

With payday loans, on the other hand, you are borrowing money, and then you pay back the loan — with interest — after receiving your paycheck. Payday loans often work out to be the most expensive loan option on the market, due to their steep interest rates. Thus, people looking for a quick financial fix may find themselves facing greater financial problems as a result of taking out a payday loan.

For this reason, salary finance may offer a more viable solution with less negative long-term impact. Because there is just a one-off fee per salary finance transaction, there are no interest rates to factor in or loans to pay back. The chances of running into longer-term financial difficulties are lower. 

The Best Salary Finance Schemes

Salary finance schemes work with companies to allow employees access to their salaries early. In this emerging market, a few key players have already established themselves:

Salary Finance

Salary Finance aims to improve the lives of the workforce by easing stress and increasing productivity. By offering both the option to access pay as it is earned and the option to take out affordable loans, Salary Finance hopes to help employers retain talent and help employees live happier lives.

Salary Finance lets employees keep track of how much they are earning in real time and how much is available to borrow. Its employee loans have a fixed APR of 5.9 percent to 19.9 percent, which is much more affordable than many borrowing options on the market. Loans can range  from $1,000 to $5,000 and are capped at 20 percent of an employee’s salary.

Wagestream

Wagestream is another well-known salary finance scheme already established in many countries across Europe and the UK, with more than 165,000 employees using the service. Wagestream has an easy-to-use app through which employees can track their wages. This is especially useful for those who do shift work. Wagestream’s fees come out to $2.39 (£1.75) per advance, paid on each payday. The maximum amount an employee can take in advance is 50 percent of salary, but this may depend on the employer.

Hastee Pay

Hastee Pay is becoming well known in the salary finance scheme world, but it is generally considered to be a more expensive option. It charges proportionally — a percentage of the amount the employee takes out as an advance — rather than a flat fee. If employees are only aiming to take out a small amount, the price can be quite cheap. For example, a person could take an advance of $100 per month for free, but beyond that, they have to pay a fee amounting to 2.5 percent of the advance.

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Daniel Tannenbaum is a startup consultant specializing in fintech, employee benefits, and digital marketing.
http://tudorlodgeconsultants.com/