Workers turn to high-cost credit to close the pay gap

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According to the fastPAYE analysis, nearly half of Britons experience “money-related” stress in the week leading up to payday in a normal month.

But this month, the problem is expected to be more intense as the 42-day gap between pay dates before Christmas and January 2020, combined with holiday season spending, makes covering daily costs even more difficult.

Indeed, the data arrives as we reach the third Monday in January which is dubbed “Blue Monday” in recognition of the fact that people start to have financial difficulties before payday.

This, along with the gloomy weather and breaking New Year’s resolutions, means it has been named the most depressing day of the year.

Sources of credit

FastPAYE research found that one in five people close the gap until they get their next paycheck – both in January and throughout the rest of the year – by turning to payday loans expensive.

Meanwhile, 43% used overdrafts – which can also result in high fees and charges – to cover the costs of the last week of the month.

However, the most common way to finance the shortfall was to credit card. fastPAYE found that 55% admitted to turning to this form of borrowing before their paycheck arrived.

Lee Bowden, commercial director of fastPAYE, said: “Our research results are deeply concerning in terms of implications for the mental well-being of people as payday approaches, nearly half of them. them signaling stress.

“However, they also expose a salary payment structure that is no longer fit for purpose.”

fastPAYE offers a “pay on demand” application that allows employers to give staff access to their already earned wages when needed.

Financial pressure

It’s not just the long wait until payday that is cause anxiety, a study by investment firm Aegon found that Christmas financial strains could increase the pressure felt by the majority of workers.

And the impact of festive spending could be felt until March.

This week, Lloyds Banking Group reported that a service it launched to support Mental Health UK by introducing expert advice to help people manage their money and grow their income has been very successful.

Mental Health

In two years, she has supported more than 2,000 people by strengthening their well-being and confidence by managing their money. The advisers settled 500 debt cases and more than 900 social benefits cases.

He said each person advised through the service saved an average of £ 2,500.

Ian, one of the people who used the mental health and financial counseling service, said: “When I contacted the service, they calmed me down and explained my problems to me. Just having someone with the time to listen was key.

“I had the same advisor all the time. She kept me informed of all the steps. I hadn’t switched from one to the other, so it gave me confidence that it would be handled properly. I feel a lot happier now: I don’t have this thing hanging from my neck. They did a great job for me.

For more information, please visit www.mentalhealthandmoneyadvice.org.

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