Abhishek Agrawal is the general manager of Access EarlyPay.
Businesses in the UK are facing a significant increase in labour costs as the National Living Wage is set to reach PS12.21 an hour by April 2025. This is not a minor adjustment for many – this is a major financial shift which requires a reassessment in pricing strategies, margins and cost-saving measures.
Some businesses will pass on the costs to their customers by raising prices in order to balance the books. Other businesses will have to dig deeper by streamlining their operations, optimising their processes and finding efficiencies everywhere possible.
Payroll is a major expense for most businesses, but it’s often forgotten. Businesses can save money by using monthly payroll and modern pay strategy .
Monthly payroll: The potential for cost savings
In a recent report on how to manage the transition to monthly payroll, we found that businesses who still use a weekly system of payroll are missing out on cost savings due to increased administrative costs, higher payroll processing fees and inefficient cash flow management.
The monthly pay structure helped 93% users navigate the crisis in cost of living and can result in savings between PS40 to PS100 per employee each year. This could result in a payroll cost savings of approximately PS140,000 for larger companies.
Businesses cannot afford to lose money at a time of increasing challenges in recruitment and retention. ONS data indicates that the UK has a high number of job vacancies, at 819,000. With labour shortages driving wages higher, it is more important than ever for businesses to maximize every pound they spend.
Why certain industries depend on weekly pay
In industries with high turnover rates, such as construction, hospitality, and manufacturing, employees have relied on weekly payments to ensure a regular income.
Recruitment remains a major challenge despite these efforts. According to a recent study by the British Chambers of Commerce, these industries are the most affected by the staffing crisis. 85% of construction firms, 80% of manufacturing companies and 76% of hospitality businesses struggled to fill positions.
Many companies in these sectors simply cannot afford to deal with the administrative burden that comes along with a weekly pay system. This model gives employees more immediate access their earnings. However, it is expensive for businesses that are trying to control costs.
Consolidating payrolls into a monthly format can help streamline operations and lower administrative costs.
Transitioning to a monthly payroll
It is the employee’s financial well-being that should be of concern when switching to monthly payroll. Workers budget their finances around weekly pay, so a sudden change to monthly pay could cause financial stress. Businesses need to develop a modern strategy for payroll that balances employee needs with cost-efficiency.
To ensure a smooth transition, employees must be provided with clear communication as well as financial assistance to make the change.
Some businesses offer an advance equivalent to three-weeks’ wages. This is recovered over the following months. However, this can be expensive for employers.
As a result, an increasing number of companies use earned wage access (EWA), or on-demand payment, as a bridge to help them transition between the weekly and monthly pay cycles. Employees can now access their earned wages at any time, rather than waiting until payday.
Long-term benefits to businesses and employees
On-demand payment can be used to reduce absenteeism and increase productivity. It also contributes to a positive work environment. EWA has also been reported to increase employee engagement, retention and the ability to attract new talent.
According to our research, 93% of users believe that EWA has helped them manage the cost of living crisis. 75% of employees that previously used credit cards or payday loan options have reduced their use of these methods.
Businesses that use EWA have seen an increase of 46% in the number of employees who take on extra shifts. They also saw an 80% increase in employee loyalty and 73% higher chances to hire new staff compared to their competitors.
These statistics show how EWA enhances employee motivation and increases stability. It helps businesses create a more productive and committed team, while also fostering long-term success for the organisation and financial security for their employees.
Payroll management made smarter
National Living Wage is not just a payroll problem – it’s an issue that affects the entire business. Businesses that use inefficient pay models are at a competitive disadvantage and will be forced to make difficult decisions about pricing, hiring and operations.
It is wise to move to a monthly payroll, but you must do it with caution. Businesses can reduce employee stress by integrating on demand pay. This will also help businesses create a more stable and engaged workforce.
It is time for the decision makers to be proactive – rethinking their payroll and adopting an innovative strategy that will ensure both financial and operational security.
Businesses cannot afford to wait and see as the National Living Wage is on its way. Payroll strategy that is proactive will not only help you stay ahead of the rising costs, but also ensure your financial stability and employee loyalty.
The first appearance of the post Cutting costs and boosting efficiency: How monthly payroll can help businesses navigate the National Living Wage increase appeared on HR News.
