Salary advance schemes | Could these help with the cost-of-living crisis - or make it worse?

Employers looking to help out their staff during the cost-of-living crisis are increasingly partnering with companies offering salary advance schemes.

These Employer Salary Advance Schemes (ESAS) are a way for employees to access up to 50% of their wages before payday, and are essentially loans that are administered through a third party, rather than their employer. The third party connects with the employer’s payroll to let the employee draw some of their wages in advance.

Online banking company Revolut recently entered the on-demand pay market, offering employees the chance to “unlock” a portion of their unearned pay, in return for a small fee. And last year CloudPay, a British company specialising in employee compensation solutions, launched CloudPay now, allowing employees on-demand access to some of their unearned wages.

It's clear to see the appeal of such schemes. As Sarah Connor writes for the Financial Times, “[I]n a world where many employers don’t offer ad hoc advances to employees any more, these products can help staff cope with unexpected financial emergencies without having to resort to expensive payday loans.”