Business, Money 20/07/2020
Startup Finances: Navigating Wage Pressures and Embracing Technology Solutions
High stress: startup finances (Pexels)
Money problems? It’s always tricky to manage startup finances, but James Herbert, CEO of Hastee, offers expert advice to steer clear of pitfalls
Startup finances, for employers and employees alike, can be a major source of stress – especially when it comes to wages. For employees, our own research, the Hastee Workplace Wellbeing Study, has found that financial anxiety impacts everything from workers’ sleep to their social lives, relationships, health, and performance at work.
According to a 2020 study from PwC, 54 per cent of people cite money or other financial matters as the greatest cause of stress in their lives. While this is a concern to employers who value employee wellbeing, it also has ramifications on the business with impacts on workplace productivity.
For startups, these pressures can be particularly acute. Oftentimes, startups can be stressful environments due to financial volatility, uncertainty of the future and the personal responsibility within these companies. For these businesses, employers are always looking for ways to ease this financial pressure and help their employees both within and outside the workplace. Yet, traditional ways of thinking about this problem can limit their ability to support employees. Sometimes these ways of thinking are outdated or ignore the unprecedented advances we have seen in financial technology in the last few years (let alone the last few decades).
Today’s employers – in startups or elsewhere – are no longer tied to the payment systems that constricted previous generations. Instead of cash or cheque payments, or a binary between weekly and monthly, modern payment systems offer the flexibility needed to reduce the wage pressures affecting today’s startups and their employees.
An On-Demand World
Today, we are used to having great flexibility in how we spend our money. The ubiquity of online and on-demand services means that all kinds of goods and services are available to the individual at their own convenience. In response to this freedom in how money is spent, it only makes sense that individuals have “flexible pay” to match, also known as “earnings on demand”. In short, earnings on demand allows employees to choose their own pay day. Rather than having their income fixed to particular days of the week or month, they now have the ability to determine when that money is made available within the month.
Though this may sound a small change, flexible pay goes a long way in reducing wage pressures and can ease worries around startup finances. With faster access to their money, employees are far more empowered than under traditional payment methods.
This statement is supported by a recent report from the Resolution Foundation titled ‘A New Settlement for the Low Paid’, which strongly advocates for flexible pay among other recommendations. Yet flexible pay models make sense for all kinds of businesses, regardless of their scale or the industry they operate within.
Flexibility Means Liquidity
The key advantage of this kind of flexibility is liquidity, as those dealing with startup finances will testify. Look at it from this viewpoint: let’s say that you are just one week before pay day and an unexpected bill arises – your boiler breaks down, your car needs some work or the water bill has suddenly gone up – this is where you need liquidity. By making cash available when it is needed, rather than at fixed points in time, workers are less likely to fall victim to those unexpected cash shortfalls that can spell intense stress and financial damage.
In many instances, payday loans may be the only viable alternative and, given the knock-on effect and high interest, this can wreak havoc in the long run. Liquidity is a viable alternative that offers greater peace of mind. There is no one-size-fits-all solution to reducing the everyday pressures of low income, but by providing workers with as much flexibility as possible, they are empowered to seek that solution themselves.
Financial technology has been one of the fastest-changing sectors, and one where everyone – consumers and those within enterprises alike – will have changed the way they work. This has similarly led to drastic changes in how finances are handled by individuals and businesses.
Earnings on demand is the latest in a long series of game-changing fintech innovations. And while it can require some explanation to understand its operation and power to ease startup finances, it can quickly remove employee pressures and boost productivity with negligible corporate financial disruption or overheads. For those in charge of startup finances, seeking flexible and passionately committed staff, flexible pay can help them bring that A-game.
