New research from Hastee Pay has found that 78% of workers use various types of credit, such as payday loans, credit cards and unplanned overdrafts, to source money quickly between pay days, suggesting that monthly outgoings are not aligned with their monthly salaries. These findings echo concerns already voiced by the Financial Conduct Authority on Britain’s debt timebomb.
The research also found that 71% of workers aged 25-44 rely on credit cards in particular. This could suggest that younger workers are risking their long term financial stability by accumulating debt with no other easy means of accessing additional funds to help them get by until payday, opening the door for a cycle of debt.
Outside of credit cards, a significant proportion of the workers surveyed who are experiencing financial difficulties, use overdrafts, doorstep loans and payday loans to bridge the gap. Almost half (47%) of the respondents have experienced difficulties relying on payday loans. A further 45% have experienced difficulty relying on doorstep loans and 40% have encountered difficulty with bank overdrafts.
In London, dependence on high cost credit is even more severe. Hastee Pay’s research reveals that 91% of Londoners rely on credit cards to help budgeting and personal finance, highlighting a potential imbalance between London salaries and the cost of living in the capital.
These findings are not exclusive to workers on low incomes. Higher paid earners and those in senior positions also find themselves financially vulnerable. The survey found that 75% of higher paid earners across the UK rely credit on cards, raising the question – are traditional pay cycles broken?
“There is a clear disconnection between spending habits and the frequency of pay,” says James Herbert, CEO of Hastee Pay. “The fact that those in steady employment are struggling to balance their incomings and outgoings paints a worrying picture. We’re not just seeing those on lower pay struggling to put food on the table but also middle-income families unable to cope with an unexpected £500 bill. The purchasing demands of modern society, with technology having created an ‘on-demand’ culture, no longer fit the traditional monthly pay cycle. The reliance on high cost credit options for even those in senior positions tells us that pay cycles are too rigid for today’s workforce to effectively manage their finances and provide for their families.”
“The financial stress this creates is impacting workplace productivity. Employers should consider offering workers immediate access to earned pay, smoothing workers’ incomes to match their spending needs. Employers already offering this are experiencing improved employee engagement. It is entirely plausible for people to enjoy a better quality of life without borrowing to get by and immediate access to earned pay can help achieve exactly that.”
Hastee Pay’s ‘Workplace Wellbeing Study’ was conducted by independent research consultancy, Vitreous World, and polled over 1,000 UK residents to uncover their working habits, credit arrangements and payment methods.