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Whilst Christmas is a time of happiness and an opportunity to spend time with the family, for many, it’s also a time of significant additional expense and financial stress. Recognising the importance of payroll during this period is essential, not just for maintaining positive relationships with employees and helping them through a challenging financial time, but also for a business’s financial health. Here, we'll look at the pros and cons for both employees and the business of running payroll early in December.
Pros of running payroll early:
Early access to salary:
Running a payroll earlier than usual provides employees with early access to their salaries during a period of heightened expense. Running payroll early can help employees prepare for the holiday season and demonstrates the employer's proactive commitment to ensuring their employees meet their financial needs.
Reduces financial stress:
The festive season creates a lot of financial stress for many people and is the most expensive time of the year. This, combined with the current cost of living crisis, can have a significant effect on health and wellbeing of employees. Running a payroll early can help employees to provide for their families and meet the financial demands of the Christmas period, which can enhance the overall employee experience and boost loyalty.
Boosts employee morale:
In addition to tangible benefits, providing early access to pay can significantly boost staff morale and communicates a genuine sense of care and appreciation. This can help to create a more engaged and motivated workforce.
Mitigates annual leave challenges:
Payroll processing can be a strategic move, especially when key players in the business plan to take annual leave during the festive season. By running payroll ahead of time, the organisation ensures smooth operations even in the absence of key personnel, preventing disruptions and ensuring a smooth transition into the new year.
Cons of running payroll early:
Offsetting January pay:
While holiday cheer may be increased by running payroll earlier in December, the downside emerges as employees face a longer time to their next payroll. Employees who’ve have received their salaries early in December now face a longer wait until the next pay date – sometimes more than a week. This change can lead to increased financial stress at the beginning of the year, requiring careful budgeting on the part of employees and support and understanding from their employers.
Cash flow challenges for the business:
The decision to run the payroll early can pose a challenge to the cash flow of the business. The focused financial expenses in December could put pressure on the company's liquidity, needing careful financial planning to avoid any negative impact on day-to-day operations. This balance is important to maintaining both employee satisfaction and financial stability of the business.
Contractual considerations:
Employment contracts specify the date that payroll is run, whether it be a specific date or the last Friday in the month, for example. Running the payroll early without consultation and agreement with employees can breach these contractual clauses and have legal implications. Employers need to be diligent and consult with HR and employees to ensure compliance and avoid potential legal complications.
Consultation with employees is needed and employers must consider giving employees an opt-out clause if they don’t want their payroll run early. Running two payrolls can cause logistical and operational problems as well as increase the associated expense of running payroll. Including early December payroll in the contract of employment can mitigate this problem.
Expenses cycle and cut-off issues:
Many companies pay employees their work-related expenses at the same time as their salaries. An early payroll cut-off may result in some expenses being missed from the pay run which can impact employees' cash flow. Clear communication and adjustments to accommodate this change may be needed. Transparency in communication and flexibility becomes key in managing employee expectations and addressing any potential problems.
How does PayCaptain help?
PayCaptain is a solution that’s been designed to positively impact the payroll experience for employees as well as giving them tools to manage their finances better, leading to better financial resilience and improved wellbeing. PayCaptain includes functionality to help employees with their finances throughout the year, but can be especially helpful in times of increased financial pressure like at Christmas. Functionality that can help mitigate additional financial stress includes:
Early wage access:
Monthly paid employees can ease their immediate financial pressures by using the automatic Weekly Advances feature. Employees can access up to £50 of their accrued earnings each week, paid directly into their bank account every Monday morning. These advances are helpful for employees to manage part of their budget on a weekly basis, while keeping keep funds protected for their bills and direct debits at the end of the month.
PayCaptain also gives employees the option to access up to £200 of emergency cash, as long as the salary has been accrued. This allows employees to deal with emergencies when they have no savings to cover them. Emergency cash is limited to £200 to protect the employee’s salary to meet their financial obligations at the end of the month – such as rent, mortgage payments and bills.
Money planning tool:
This functionality allows employees to calculate their income and expenditure and lets them to create a personalised budget. This gives the employee a better view of outgoings and the disposable income they have once their financial commitments are met. Using the money planning tool throughout the year can help employees budget better for the festive season.
Having the knowledge of incoming, outgoings and disposable income will allow the employee to plan their spending better and, in conjunction with other tools in the PayCaptain mobile payroll app, may enable them to build some payroll savings using savings pots or SmartPay for improved financial resilience.
Savings:
Employees can pre-plan the amount to save and it is automatically transferred from net pay. This builds some resilience for times of financial hardship or for periods of increased spending. As the interest rate is currently higher, in an attempt by the Bank of England to slow down spending – the value of savings is increasing. If an employee can save during the year, it can ease the financial challenges of Christmas and longer period between December and January payrolls.
Payment splitting:
Payment splitting gives the employee the capability to set up automatic payday payments in the app, directly from their net pay. This eliminates the risk of paying essential bills late or missing them entirely.
In conclusion, the decision to run payroll early in December involves a delicate balance between assisting employees to meet their financial obligations in December and January, employee satisfaction and the operational and financial considerations of the business. Careful planning, open communication and a proactive approach to potential challenges can help organisations find the balance.
Running payroll early in December requires foresight, adaptability and a commitment to both financial responsibility and employee wellbeing. By understanding the pros and cons of running payroll early in December, businesses can make more informed decisions to support their workforce while protecting their overall financial wellbeing.
