Reward insight
The devil in the details
IanWhytesideMCIPP FMAATATT, CIPP board director, discusses payment on demand
T his year has brought a flurry of questions about the traditional payroll process. This time the issue is about paying employees more frequently than we may have ever considered in the past. Is ‘payment on demand’ a push for necessary change or an annoying fad? Monthly payroll dominates our world covering the vast majority of UK employees, but anecdotal evidence suggests around six million employees are paid weekly. Generally, these are the longest and shortest frequencies in use. Payment on demand is based on the view that employees should not have to wait to be paid for the work they have performed. Since monthly pay at or towards the end of the calendar month dominates, it means employees are often being paid four weeks in arrears and a couple of days, if anything, in advance. It is easy to sympathise with the view that such an arrangement is unreasonable and bears heavily on many employees. Some of the comments favouring change suggest that the move to less frequent payment is actually driven by banking and corporate greed. Though this notion may have been true of certain businesses it is difficult to accept that every change in pay frequency was
driven in such a way. There is no doubt that less frequent payroll processing is administratively efficient and cost effective – more so if the payroll is outsourced to a commercial provider. The recent growth in cash payments is largely driven by increases in handling charges imposed by the banks.
brought to us a much greater demand for employers to take more notice of employee financial wellbeing. This has led to some employers introducing financial planning programmes and sometimes financial assistance where an employee requires it. However, Julie Lock pointed out in her article Flexible paydays, (see Professional in Payroll, Pensions & Reward , April 2019), only 12% of employers offer their staff formal, face-to-face, financial advice. This is unlikely to change much – and small businesses tend not to do any of this. Whilst recognising that statistics show levels of short-term debt are now greater than at any time, this still does not show clearly that making payroll payments more frequently is the answer. For many it will provide short-term relief, there is no doubt; but surely a question mark hangs over it being ‘the answer’. The desire for more frequent payment to help people with their finances is the complete opposite to the 1980s. During this period employees faced a revolution in financial transactions with banks and building societies, landlords, councils and others moving to monthly payments processing. Many payroll teams, like my own, found that weekly paid staff were
...some have suggested it is required as an aid to personal finance
A second argument for more frequent and on demand payment is that employees should, and sometimes need, greater control not only over the amount they are paid but also how frequently. As an aside to this, some have suggested it is required as an aid to personal finance. It is argued that more frequent payment is needed to allow for proper and more effective personal budgeting. Is this a genuine shift in personal spending, or a means to market a payroll system’s ability to generate payment on demand? There has always been people who live with tight finances, but this century has
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| Professional in Payroll, Pensions and Reward |
Issue 53 | September 2019
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