Can I get it?

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“Can I get it?” is the most common question we hear at Level when asked about salary advances.

This illustrates the continuing confusion and lack of credible resources about emerging solutions for salary advances and new digital services, such as earned wage access.

Like most new technologies, the rumour and hype that surrounds earned wage access far outstrips the extent to which it has actually be implemented in the workplace in the UK. 

Early Wage Access in organisations

The number of companies that actually offer earned wage access services to their employees remains small. As a consequence, it is not surprising many workers continue to ask, ‘Can I get it?’

Salary advances have traditionally been undignified, unpredictable, and frustrating experiences.

The established approach is to meet privately with your line manager, request an advance accompanied by a compelling reason that justifies such an exceptional request then wait some time for a response. Typically the response is negative as companies are reluctant to be seen to be encouraging these events.

The very nature of the process, both from a psychological and practical perspective, is designed to ensure that advances are infrequent. 

Those that want more frequent salary advances are required to be creative in terms of the reasons they need to share with their line managers who must evaluate their requests. In fact, it’s not unusual for staff to informally share justifications amongst themselves with those that are proven to work commanding high values.

But why should salary advances be seen as infrequent exceptions to the rule? Who says they can’t be the norm, instead of the other way round?

Just as the fact of monthly pay was determined by the technical and operational constraints of delivering it, so advances in technology can change established practices.

Developments in internet technology and Open Banking are transforming the landscape for financial services. We believe these developments will define new attitudes and behaviour in respect to our finances which will not be reversed.

One output of this revolution in ‘fintech’ is the earned advance, of which Level is one provider. 

Level’s software facilitates small value advances to employees of income they have already earned but have not yet received due to monthly pay cycles. 

The principal characteristics of earned advances

  • They are not loans, so do not require users to undergo credit checks
  • They do not accrue interest, so do not compound debt-cycles
  • They are automatically repaid each month thanks to a ‘salary link’ with their employer’s payroll
  • Advances are only made on a salary that is earned, so there is no default risk.
  • They are digital services, so accessible to anyone with a mobile phone or computer.

Earned advance providers in the US, such as PayActiv and DailyPay, are well established and have been introduced as an employee benefit to some of the largest employers in the country.

Evidence from both the US and the UK indicates a high adoption rate of earned advance services when introduced.

The most extensive analysis, conducted by The Harvard Kennedy School in the USA, found evidence of improved employee productivity and retention.

It concluded that employer provisions of earned advance services, “are associated with materially lower employee turnover rates, which could potentially save them tens to hundreds of millions annually.” 

An important corollary to the introduction of automated salary advance service is the emphasis that must be placed on user privacy. 

Research indicates that part of the appeal of PayDay Loans is their confidentiality. Transactions are conducted in a non-judgemental context and users welcome this aspect, particularly when compared to the alternative, less dignified options.

We respect the dignity of our users and recognise the importance of maintaining confidentiality in order to alleviate recourse to PayDay Loans.

As such, it is not the policy of Level to share transaction details with employers as a matter of course. 

Any assessment of earned advances must take into account the shortcomings of the status quo. 

The continuing success of PayDay Loan providers indicates persistent demand for low-value borrowing to offset short-term exceptional expenses. Providers that presently meet these needs all serve to compound long-term cycles of debt.

Advances in financial technology from ‘fintech’ startups bring wide-reaching, long-lasting change and will establish new norms of financial management. 

In May 2018, Todd Baker and Snigdha Kumar, as part of research undertaken into earned advances, remarked upon, “the enormous potential for FinTech financial solutions delivered through the employee channel to improve financial health and reduce stress among low-income working Americans and significantly reduce the turnover costs of large employers.”

Level believes the earned advance will make an equivalent impact upon working people in the UK. 

The earned advance is the most risk-reduced solution to low-value, short-term financial needs. 

With appropriate safeguards in place, it will become a pervasive employee benefit, offered by almost every large employer within the next 5 years.

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