Payday loans, with their associated high interest rates may become a thing of the past if a new scheme which allows employees to gain early access to earned money, takes off.
Wagestream, the company behind the scheme, is currently in talks with NHS trusts, local authorities and the army and believes that hundreds and thousands of public sector workers could benefit from the scheme within the next 12 months.
Workers, whose employers sign up to the scheme are given an app that shows them how much they have earned throughout the current pay cycle and how much they can withdraw early. Their employer decides what limit to place on withdrawals, to ensure that staff still have money coming in to their accounts on payday. This could be a life saver for lower paid workers without savings faced with an unexpected bill mid month who could otherwise be pulled into the spiral of high cost credit.
Concerns have been raised that users could find that there is insufficient money being paid into their account come payday to cover the usual monthly expenses but safeguards are imposed to restrict the percentage of the salary that can be withdrawn early and the number of transactions that can be made.
The number of workers in poverty is now estimated to be over 4 million, and indebtedness remains an ever increasing problem. Wagestream has gained the support of a number of social enterprises and charities who believe that the scheme not only improves financial wellness for employees but that employers also benefit by seeing increases in productivity, motivation and retention.
With more public and private sector employers signing up, thousands more workers will soon find out if this helps them budget or encourages them to spend.
