Demand for on-demand pay services surges

Demand for services that provide workers with advance pay is soaring.

According to some leading financial technology businesses that allow workers to access salaries early, as the cost of living crisis deepens, the number of employers signing up for on-demand pay services has gone up.

The client base at Wagestream, one of the biggest providers, has doubled to more than 300 employers in the past year. Its clients include NHS trusts, Gordon Ramsay's restaurant group, Next, Halfords, Travis Perkins, the Co-operative Group and Pizza Express. At the end of 2021, only a million workers had access to its app, but that has grown to more than 2.5 million.

More than half of the employees on the service say they are accessing their pay early to pay for groceries or to cover bills, whereas leisure and holidays account for only 7 per cent - a figure that has been falling since last year, as people feel the pinch from inflation, which is at a four-decade high.

The increase in monthly active users has resulted in a doubled of request for Revolut's salary advance service since November.

On-demand pay services typically charge a flat fee of 1.50 to allow employees to access part of their accrued earnings before their usual payday. This cost can be shouldered by a business or its staff. In an effort to prevent people getting into financial difficulty, there is a cap on the amount that can be withdrawn.

Revolut said it was like asking to be paid fortnightly or weekly instead of waiting until the end of the month. This allows customers to manage their finances as best suits their circumstances. Peter Briffett, 50, chief executive and founder of Wagestream, said it was hard for companies to increase wages but flexible pay is a good place to start. The rise in interest shows a greater understanding of the stresses frontline workers are facing. Users of the app accessed their pay early about twice a month, on average, he said.

Employers are increasingly concerned about their staff's financial wellbeing. In a report by EY, consultants said that on-demand pay was a valuable service, preventing people from turning to more nefarious sources of finance. It said that seventy per cent of people in the UK and US experience financial stress regularly.

Half of these individuals have had a shortfall between their pay periods and have to deal with this issue about every four months. This leads to deterioration of their health and wellbeing. The Resolution Foundation think tank said that 1.3 million families in Britain had no savings before the epidemic, with more than a quarter saying they would be unable to cope with unexpected expenses.