Cards are used for more than half of payments in the UK, accelerated by coronavirus and innovations in the financial industry. Some even argue that notes and coins could be on the way out. Then why do some employers still pay in cash?
Here are a few reasons why businesses should make the move to cashless wages if they haven’t already.
1) Security and Ease for Businesses
Cash wages are a dying breed. Sorry nostalgic payroll managers – the days of counting up the notes and change from an envelope’s plastic window are numbered!
The businesses we speak to on a daily basis already know this and are happy to avoid the stress of cash wages, but not every business has made the move.
For businesses who still pay in cash, keeping substantial amounts of cash aside can be a concerning security risk. You pass this risk onto your employees every payday making saving and budgeting difficult. If you’re not concerned about security, surely the hassle of withdrawing large sums of cash on a regular basis is.
None of this advice is new, and after speaking to our multiple business partners would agree, know that. Although legal, cash in hand wages is more trouble than it’s worth with multiple businesses. We’ve found that even smaller businesses in traditional sectors have opted to carry out payroll using some kind of automation to help with the calculation of relevant taxes keeping them in line with the law.
2) Modern Slavery
Putting an end to cash payments is one of the simplest ways your business can help end modern slavery. Paying wages to an account with your employee’s name on it gives you the peace of mind that all wages are safe from outside interference.
The Gangmasters and Labour Abuse Authority (GLAA) define victims of modern slavery as those who have been subject to human trafficking, forced labour, domestic servitude, or debt bondage. Employers in agriculture, horticulture shellfish gathering or any associated industry are usually aware of the impact of modern slavery must have a GLAA licence. They have an obligation to make sure labour in their supply chains is ethically sourced.
However, even licence holders can overlook the significance of cash payments in contributing to modern slavery. Migrant workers in the UK are amongst those affected, sometimes forced into work by family or acquaintances with a cut of their wages expected to be shared, sometimes concealed as a “debt” to be repaid.
Avoiding cash wages makes this a lot harder by ensuring all employees are the only direct recipient of the funds.
Modern online banking accounts have security benefits that help employees stay in full control of their money such as the use of passwords, OTPs and staff trained to be on the lookout for the signs of modern slavery. At Suits Me, we also have a multilingual customer care team so account holders can get advice in their own language, stopping them from looking for help and possibly risking the privacy of their account.
It is always important to be on the lookout for modern slavery in your company supply chain, check our latest blog post on modern slavery for more ways to spot if your employees are victims.
3) Financial Exclusion
Financial exclusion remains an issue in the UK, the latest government Financial Inclusion Report suggested that 1.23 million people still remain unbanked.
Financial exclusion occurs when a person cannot access financial services including basic banking, credit and insurance. There are many reasons why this can happen to someone including their address and immigration status, credit score or, more often than not, poor financial literacy.
Cash wages can inadvertently contribute to financial illiteracy and entrench people in exclusion. Regular cash payments provide little motivation to save in accounts with interest, use credit and build their credit score or access essential financial services.
Luckily for the unbanked, there have been countless strides in the financial sector to put an end to financial exclusion. Banks are now required by the government to offer basic accounts to their customers and British fintechs have been there for businesses to help their new starters get their first banking accounts through the use of payroll cards (more on that later).
4) Cash is Dying Out Anyway!
You’ll already have noticed that Coronavirus has changed the payments landscape: contactless payments up to £100, stores asking you not to pay by cash where possible, online shopping becoming one of the most profitable industries around.
The pandemic didn’t start it though, the trend started a long time before.
The Bank of England has argued that with £70 billion worth of cash still in circulation, it’s not going anywhere soon – however, the other statistics don’t agree. Cash usage has exponentially declined in the last 5 years. The UK had the most cashless payment transactions in Europe as early as 2018, beating second-place France by an impressive 4.2 billion transactions.
Card payments accounted for just over half of all purchases in the UK in 2019 and since then the prognosis for cash has only grown grimmer. In September the Royal Mint announced it would stop making 2p and £2 coins for a decade due to a massive surplus- there were 26 times too many £2 coins than required.
No matter what the Bank of England suggests it’s sensible to argue that paying wages in cash is anachronistic. Cash accounted for under a quarter of all purchases last year and it seems likely that the number of establishments preferring card should rise alongside that. To future proof your employees and your payroll system in its entirety, move to payment by bank transfer.
What if my Candidates Don’t Have Access to a Banking Facility?
One of the last arguments against ending cash wages all together is what happens when your new starters don’t have access to suitable banking? If they seem like the best person for the job, surely it’d be wrong to turn them away?
Payroll cards are there to help, Suits Me provides our business partners with a free online portal which lets them open their new starters an award-winning online banking account in minutes. Your new starters won’t be credit checked or need a fixed UK address to open an account, eliminating financial exclusion and giving them what could be their very first UK banking solution.
For you, it means streamlining your onboarding process and giving you access to candidates you might otherwise turn away. More importantly, it could mean finally putting a stop to tiresome cash wages.