A research paper has been written in February 2021 on the subject of saving through payroll, specifically through Credit Unions. We have seen over recent years a large selection of these savings models appear in the market with many employers therefore considering their value.
The report was undertaken by the Financial Inclusion Centre sponsored by the Ooney and Pensions Service, funded by the government focusing on the topic was Getting Workforces Saving:
It was confirmed through UK statistics that:
- 21% of adults do not save, and 22% have less than £100 in savings (2018 statistics)
- Increasingly the workplace is seen as a prime arena to deliver financial services/guidance and support
- It was seen that there were clear business benefits in improving employee’s financial wellbeing as more productive, less absence, more effective and less stress
- Payroll deduction is growing as a mechanism for workers to access loans and to save.
These schemes work in a similar way to any other payroll deduction, so the employee decides on the scheme, notifies HR/payroll and it’s deducted from payroll and then the employer pays to the credit union (or other savings institution).
The principle is therefore this form of scheme could reach large numbers of people, encourage saving attitudes, and thus build financial resilience and in turn also better employee performance.
There were also key findings from study:
- Credit Unions tend to attract lower paid employees
- They Offer incentives to employees to start saving
- F2F promotion was expensive and not effective
- Payroll deduction schemes encouraged non savers to start saving
- Payroll scheme members saved significantly more than non-members
- Financial stress could be gradually reduced as members got used to saving
In payroll we are seeing a number of changes to pay and saving, especially as we move out of COVID lock down in line with what could be a step change in how people are working and being paid in the future so you would expect that this subject will become more “mainstream” in conjunction with other changes.