In today's uncertain economic climate, building a financial safety net - even a modest one - can make a world of difference. Payroll savings schemes offer a simple yet potent vehicle for helping employees develop saving habits that enhance their resilience and long-term wellbeing.

The FCA’s 2024 Financial Live survey found that 1 in 10 people have no cash savings and 1 in 5 had less than £1,000 saved, and the position is even worse for those aged under 35. This lack of savings  makes it very difficult for people to deal with even a minor financial hiccup.

One solution is payroll savings where employees divert a portion of their salary into a savings account  automatically. Payroll savings schemes are nothing new but uptake has been worryingly low: according to the Department of Work and Pensions, only 7% of employers currently offer payroll saving schemes. even when an employer does offer such a scheme, take up by staff can be low.

But financial worries can have a significant impact on productivity. In the PwC 2023 Employee  Financial Wellness Survey, 44% of employees surveyed felt that financial worries had been a distraction at work and over 50% had spent at least 3 hours a week at work dealing with these issues. This  productivity impact is backed up by the International Foundation on Employee Benefits who found  here was a 25% increase in productivity among employees who are not concerned about their finances.

Some employers cite regulatory confusion as a barrier to introducing payroll savings – namely around  minimum wage rules, regulated advice and financial promotion regulations. In August this year, the FCA released a statement aiming to clear up misconceptions and offer practical guidance on how employers and savings providers can set up these schemes compliantly. In simple terms, as long as a scheme is opt-in (i.e. an employee doesn’t have to join); does not involve regulated activities or advice;  and the employer is simply offering the scheme to employees and not engaging in a financial promotion, then there is not a problem. In terms of minimum wage concerns, if the above conditions are  met then payroll savings are not a problem – if employees have to opt-in then there’s no difference between them joining a payroll savings scheme or taking their wages and then paying into a savings account themselves.

The beauty of payroll savings is their simplicity: an employee just needs to signup and then they can  forget it, the agreed amount will be deducted and deposited into their savings account without them needing to do anything else. And from our own experience providing payroll savings for over 50  employers, many forget its even happening and are delighted when they do realise that their small regular deposit has grown into a meaningful financial buffer, especially when they have an unexpected financial challenge.

Leeds Credit Union, like many other credit unions, plays a pivotal role by advocating for payroll  savings adoption, in partnership with local employers. By partnering with trusted savings providers,  employers can offer structured, easy-to-use schemes that empower employees to take their first steps toward financial resilience.

Inaction is no longer an option—starting small through payroll savings can pave the way to stronger, steadier financial futures for individuals and communities alike.

Find out more

To find out more about Leeds Credit Union’s payroll scheme, visit: 
https://leedscreditunion.co.uk/payroll-services

To read the FCA’s statement on workplace savings, visit: https://www.fca.org.uk/publications/corporate-documents/statement-workplace-savings-schemes