Recommendations & Conclusions
6 items
5
Recommendation
Thirty-Fifth Report - The pharmacy earl…
Rejected
The growth in salary advance schemes across the NHS raises questions about their status as unregulated consumer lending. In February 2021, the Financial Conduct Authority (FCA) published the Woolard Review which noted that the salary advance schemes market was predominantly found in the hospitality, retail and healthcare markets and was …
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The growth in salary advance schemes across the NHS raises questions about their status as unregulated consumer lending. In February 2021, the Financial Conduct Authority (FCA) published the Woolard Review which noted that the salary advance schemes market was predominantly found in the hospitality, retail and healthcare markets and was still in a stage of relative infancy. It stated that salary advances could result in some users experiencing a shortfall in income at the end 8 The pharmacy early payment and salary advance schemes in the NHS of the month, leading to the risk of persistent use of the product, escalating charges or driving consumers to use mainstream or potentially high-cost credit to ‘bridge the gap’. The NAO investigation, which surveyed eight NHS trusts, highlighted that active users of the salary advance scheme ranged from 1.3% to 10% of employees by NHS trust. Following the collapse of Greensill Capital, some trusts have moved to a paid-for scheme provider which charges both the employer and the employee. We understand from NHS Shared Business Services (NHS SBS) that 60 of 100 NHS trusts serviced by NHS SBS were interested in salary advance schemes. It is worth noting that other NHS trusts have contracted directly with scheme providers. The increasing appetite for salary advance schemes clearly brings with it greater risks to customers, but as yet these schemes remain unregulated. Recommendation: The Department along with HM Treasury, should work with the FCA to consider, as a matter of urgency, what measures and regulation can be applied to salary advance schemes to enforce the adoption of a code of good practice by scheme providers and employers. The pharmacy early payment and salary advance schemes in the NHS 9 1 Unsubstantiated business cases
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Government response AI summary
The government rejects the recommendation to urgently consider regulation for salary advance schemes, arguing they do not constitute credit and lack evidence of consumer detriment. It welcomes the industry's development of a code of practice and will engage with it.
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HM Treasury
20
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Rejected
The failure of Greensill Capital resulted in some NHS trusts switching to a paid for salary advance scheme. When Greensill Capital failed in March 2021, the Earnd UK business (formerly FreeUp Finance Limited) ceased to operate. Wagestream, an existing market participant, which provides various wellbeing services (including Earned Wage Access, …
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The failure of Greensill Capital resulted in some NHS trusts switching to a paid for salary advance scheme. When Greensill Capital failed in March 2021, the Earnd UK business (formerly FreeUp Finance Limited) ceased to operate. Wagestream, an existing market participant, which provides various wellbeing services (including Earned Wage Access, also known as salary advance) acquired Earnd Australia, along with global trademarks and intellectual property and the rights to approach Earnd’s customers in the UK. Wagestream charges for its services—typically an implementation sum or annual software fee to the employer, as well as £1.75 per transaction which is either subsidised by the employer or paid by the employee. Some NHS trusts have switched to this provider, thereby incurring costs where previously they received the service for free.21
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Government response AI summary
The government rejects regulating salary advance schemes, stating they generally fall outside credit regulation, show no substantive consumer detriment, and thus do not merit regulation. It welcomes an industry code of practice and will monitor for future consumer detriment.
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HM Treasury
29
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Rejected
The National Audit Office reported that between 1.3% and 10% of staff at NHS trusts were looking at using these services, so, clearly, a substantial number of people. We asked NHS SBS what expectations it had of usage of payday advance schemes. Given NHS SBS was providing payroll services for …
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The National Audit Office reported that between 1.3% and 10% of staff at NHS trusts were looking at using these services, so, clearly, a substantial number of people. We asked NHS SBS what expectations it had of usage of payday advance schemes. Given NHS SBS was providing payroll services for around 400,000 people, that would be between 5000 and 40,000 people a month who would potentially be using the services. NHS SBS told us that at the point it started the pilot, it was really hard to estimate because the pilot it was running for NHS providers was one of many. The differentiator was that the scheme from NHS SBS was free at the point of use. It was voluntary and there was no cost to the employer and the employee and its estimates were a 2% adoption over the five-year period.30
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Government response AI summary
The government disagrees with the implied recommendation to regulate salary advance schemes, stating they do not typically involve credit, show no substantive evidence of consumer detriment, and regulation would impose unnecessary costs. It welcomes an industry-led code of practice and will engage with its development.
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HM Treasury
30
Recommendation
Thirty-Fifth Report - The pharmacy earl…
Rejected
The Woolard review noted that the salary advance schemes market was predominantly found in the hospitality, retail and healthcare markets and was still in a stage of relative infancy. It stated that salary advances could result in some users experiencing a shortfall in income at the end of the month, …
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The Woolard review noted that the salary advance schemes market was predominantly found in the hospitality, retail and healthcare markets and was still in a stage of relative infancy. It stated that salary advances could result in some users experiencing a shortfall in income at the end of the month, leading to the risk of persistent use of the product, escalating charges or driving consumers to use mainstream or potentially high-cost credit to ‘bridge the gap. The review identified the importance of providers and employers monitoring usage and proactively engaging with employees when there are indications they are in financial difficulty, and the need for greater clarity over who has ultimate responsibility for monitoring and supporting individual employees who may be in financial difficulty.31
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Government response AI summary
The government rejects the recommendation to urgently consider regulation for salary advance schemes, stating that they generally fall outside credit regulation and there's no substantive evidence of consumer detriment to merit it. However, it welcomes and will engage with the development of an industry code …
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HM Treasury
31
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Rejected
Greensill Capital’s approach coincided with NHS trusts’ own research into salary advance scheme providers in the context of staff financial wellbeing and employee benefits. NHS trust working papers also showed that employers considered the service could provide additional benefits, including reductions in agency bills, increased take up of additional shifts, …
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Greensill Capital’s approach coincided with NHS trusts’ own research into salary advance scheme providers in the context of staff financial wellbeing and employee benefits. NHS trust working papers also showed that employers considered the service could provide additional benefits, including reductions in agency bills, increased take up of additional shifts, and improved recruitment and retention. We asked NHS SBS, in its role as service provider to many NHS trusts, whether there was evidence that salary advance schemes had helped with retention or helped increase recruitment and lower agency bills. NHS SBS told us that it was too early to tell as the first pilot started in July 2020 but that the demand which started back in 2017 had continued with requests from 29 C&AG’s Report, para 22, Appendix 3; Woolard Review; 30 Q 160; C&AG’s Report, para 3.25 31 C&AG’s Report, Appendix 3, paras 4–5 The pharmacy early payment and salary advance schemes in the NHS 17 NHS trusts. NHS SBS told us that it had identified 60 NHS organisations using financial wellbeing schemes. The Committee questioned why there was a difference between what civil servants and NHS staff can access when it comes to salary advance schemes.32
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Government response AI summary
The government disagrees with the need for regulation of salary advance schemes, stating it has not seen substantive evidence of consumer detriment and believes existing frameworks are sufficient. It welcomes the development of an industry code of practice and will engage with it.
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HM Treasury
32
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Rejected
We asked if there were lessons particularly for the Department about promoting these products that have no FCA imprint. An employee on a low salary might decide to take some early advance and it is not actually a regulated product at all. There may be other less advantageous loan schemes, …
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We asked if there were lessons particularly for the Department about promoting these products that have no FCA imprint. An employee on a low salary might decide to take some early advance and it is not actually a regulated product at all. There may be other less advantageous loan schemes, but they will have some regulation. The Department agreed that it was certainly worth noting that the National Audit Office reported that when trusts go into these schemes, it is very frequently to give their employees options that are not much more expensive loans. The Department told the Committee that there is expectation that NHS trusts, in considering these schemes take all information into account.33 32 Qq 158–159, 162; C&AG’s Report, para 3.14 33 Q 203 18 The pharmacy early payment and salary advance schemes in the NHS
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Government response AI summary
The government rejects regulating salary advance schemes, stating they generally fall outside credit regulation, show no substantive consumer detriment, and thus do not merit regulation. It welcomes an industry code of practice and will monitor for future consumer detriment.
Read full response →
HM Treasury