Salary Finance review November 2019
A wide range of financial solutions to help you avoid high-cost borrowing.
Not one for imaginary names, this startup does exactly what you’d expect from a company called Salary Finance: it offers a range of financial services for employees that are tied to their wages. In plain English, this means that if your employer works with Salary Finance, you’ll be able to borrow or save money having the monthly instalments taken directly from your salary, so that you can get a better deal and, once it’s all set, don’t have to think about it anymore.
The company was founded in 2015 by former head of Google UK Dan Cobley, together with Asesh Sarkar and Daniel Shakhani, and works with some big employers such as Sainsbury’s and BT Group.
The best thing about Salary Finance is that you have options. Some of the competitors only do salary advances or employee loans, but Salary Finance really covers the whole spectrum of services available on the market. Considering that employers normally only register with one (if any) of these companies, this is a really big pro. Another one is that, unlike with some of its competitors, details of how much employees withdraw or borrow aren’t shared with employers, thus safeguarding the workers’ financial privacy.
Salary Finance’s services are all meant to improve employees’ financial wellness, by making it easier to save regularly and avoid more expensive forms of borrowing (such as overdrafts and payday loans).
How does it work?
Salary Finance offers four types of services.
Salary Finance launched these in December 2018. Instead of only being paid at the end of the month, employees can withdraw up to 50% of the salary they’ve earned anytime, in return for a flat £2.99 fee for each withdrawal (which is competitive although not the cheapest available on the market).
Since you’ve technically already earned the money, you don’t have to go through a credit check or pay the money back. From the employee’s point of view, the main drawback is that you may be tempted to overspend during the month, and then find it hard to meet your regular expenses (such as the rent or a public transport travel card).
From the employer’s point of view, Salary Finance funds the advances, so there’s no impact on the company’s cash flow.
An employee loan looks more or less like a regular loan: you apply, are credit-checked and are offered a rate depending on your credit score and circumstances.
With Salary Finance, you can take out between £1,000 and £25,000, up to 20% of your basic annual income before tax. So for example, if you earn £25,000 a year before tax, you could be able to borrow up to £5,000. Keep in mind that you’ll be borrowing from Salary Finance, not from your employer.
The difference with a regular loan is that repayments are taken directly from your salary, so you won’t have to think about it anymore. In most cases, this will also allow you to access a better rate than what you’d get with a traditional lender, especially if your credit score isn’t perfect.
Through Salary Finance, you can open a savings account with the Yorkshire Building Society and link it to your salary. You can set how much of your wage you want to put aside every month and Salary Finance will do it automatically for you before the money even reaches your account, so that you’re not tempted to spend it.
You can change how much you want to put aside anytime and also withdraw your savings whenever you need them (it’s an easy-access account). The service is free but the interest rate isn’t stellar (0.75% AER).
Finally, be aware that not all the companies that Salary Finance works with offer all four services. Many have only registered for employee loans, in which case you won’t be able to request a salary advance or open a savings account.
Help to Save
Help to Save is a government scheme that allows people on Working Tax Credit or Universal Credit to receive a 50p bonus for every £1 they save over 4 years. You can learn more about how it works on the dedicated section of the government’s website.
If you qualify, you can open a Help to Save account and then connect it to your salary using Salary Finance, which will then automate your savings process taking a sum directly from your pay every month.
Pros and cons
- A cheaper alternative to payday loans.
- No impact on the company’s cash flow.
- If you opt for a salary advance, you won’t go into debt or have to pay the money back.
- Offers salary advances, loans and saving options, so it can suit different needs.
- Doesn’t tell your employer how much you withdraw/borrow and when.
- You can repay your loan early without extra fees.
- You can automate your savings and put aside money without even thinking about it.
- You may be tempted to overspend during the month.
- The interest rate on the savings accounts isn’t especially competitive.