Before 1960, the overwhelming majority of the UK was paid weekly, in cash. Since 1960, the digitisation of pay and an increasingly complex tax system has
meant that the cost of running payroll has ballooned for companies. So today, three-quarters of us are paid once a month. But in a 21st-century world of instant banking, digital wallets and on-demand everything, waiting weeks for pay feels increasingly out
of step.

For employees, the lag between work done and money received is no longer a simple inconvenience. With the current economic challenges, it’s quickly become
a source of stress and financial vulnerability. It is no coincidence that today there are as many credit cards as there are people in the UK, and
three
in ten are regularly going into their overdrafts. For employers, it translates into distracted staff, higher turnover and declining productivity. As a result, finance leaders should be asking
whether rigid pay cycles do more harm than good.

The hidden cost of monthly pay

Research consistently shows the strain that outdated pay structures create. When surveyed,
52% of employees
said financial worries have negatively affected their work performance. In addition,
80% of employees
facing financial stress said they felt anxious or depressed at least once a week, showing a direct link between financial health and mental wellbeing. Put simply, when people are worrying about how to make it to payday, they are not performing at their best.

The impact is visible on business performance too. Other research shows the effects of financial presenteeism, where employees turning up for work but struggling
to concentrate because of money worries. As well as high levels of absence linked to financial stress,
around half
of those surveyed admitted they were distracted on the job for this reason.

The situation is worsened by household debt levels – UK household debt now stands at
117% of disposable
income, while
one-in-four
people in the UK have low financial resilience, which means they either have missed payments, are struggling to pay off debts or don’t have savings to help them. At the same time, UK households’
total interest payments on personal debt across the country were estimated at
£85.5 billion for the 12 months to July 2025.
That works out to an average of about £2,975 per household in interest.

In such conditions, the monthly pay system forces many employees to turn to overdrafts, high-interest credit or payday loans just to cover essentials between
paydays.

What employees actually want

In recent years, some employers have turned to earned wage access (EWA), which lets employees access part of the pay they’ve already earned before payday.
It can ease the pressure of short-term cash flow and reduce the need for high-interest credit. However this has traditionally been something individuals must pay for in order to benefit from, which can be counterproductive. So while real-time access to pay
does deliver financial wellbeing, charging those employees for access, which may help someone financially excluded to cover emergencies, doesn’t address the root cause of financial wellbeing issues. The key here is for financial leaders to rethink how pay
is structured, delivered and supported.

As a result, flexibility and control matter more than ever. While salary is the most important factor for
72% of
workers, when employers can’t deliver enough of it, they should instead seek cost-effective alternatives such as more flexible financial benefits – real-time pay, automated savings or cashback
rewards. Financial wellbeing is now considered the most critical focus for benefits, with
65%
of employees viewing it as very important, compared with 53% in 2022.

Organisations stand to benefit materially from this, strengthening their business performance. As a result, they see lower turnover, as a more engaged workforce
is a more productive team. In addition, reduced time spent by payroll teams on administrative firefighting frees them to act as strategic partners to HR and finance.

At the same time, financial wellbeing directly impacts retention issues.
PwC
reports that 73% of financially stressed employees say they would be attracted to another employer that cares more about their financial wellbeing. Therefore, companies that offer modernised
solutions can differentiate themselves not just on salary, but on the quality of the overall employment experience.

Rethinking pay for the modern economy

Payroll is quickly becoming a lever of engagement, wellbeing and competitiveness. Modern approaches, whether through real-time pay options, automated savings
or integrated rewards, show that flexibility is possible without compromising compliance or cashflow.

Monthly pay is a system optimised to reduce corporate admin, to the detriment of employee productivity. Delivering regular pay via third party providers
offers the best of both worlds. Today’s employees live in an economy of instant access and real-time services. If pay lags behind, businesses will continue to pay the price in lost productivity, higher attrition and disengagement.

Finance and HR leaders have a choice. They can continue with rigid cycles that force staff into debt and undermine performance. Or they can embrace payroll
as a strategic tool, offering employees greater control and security. This move will define the winning organisations of tomorrow.