It’s no secret that South Africans across a broad range of income brackets struggle with their finances every month. In fact, research released in 2022 shows that most middle-income earners spend 80% of their salaries within five days of payday. Additionally, a growing number of South Africans rely on credit cards for essentials like groceries and clothing. None of this has been helped by a moribund economy and rampant inflation over the past couple of years.
These financial woes can be incredibly stressful to employees and place a burden on employers as productivity levels diminish when employees are financially stressed.
That’s something which South African startup Floatpays knows all too well. Its research, released in 2022, shows that 74% of South African employees rate their financial stress levels as medium to high. And, while it can’t eliminate financial stress, it’s also something that the company hopes to at least alleviate with its range of financial products.
“We all know how difficult it can be to focus on work when we’re dealing with something stressful in our private lives,” says Floatpays Chief People Officer Andisa Liba. “That’s especially true when it comes to financial stresses, which can range from worrying about debt and retirement savings to rising transportation costs and food prices and even family commitments.”
“Many employers know how big an impact these stresses can have on their employees’ productivity,” she adds. “Historically, however, employers have primarily tried to address them through education. While financial education is undoubtedly a vital tool, it can only achieve so much. Financial education needs to be paired with the right corrective measures for people to move from a financially despondent place to a financial consciousness. To achieve this, employees need access to the right financial instruments as well as guardrails that support the transition.”
FloatPays aims to achieve this by partnering with Africa’s employers to give their people the ability to instantly access their earned wages whenever they need them, save, and manage their money better.
The first of those is achieved through a platform that allows employees to access a portion of their earned income in the current pay cycle. That’s important as it allows people to deal with emergency spending during the month without having to resort to credit cards or short-term loans or engaging with the informal lending sector or abo Mashonisa who can compound further their financial woes and sink them deeper into worse debt cycles. In fact, with Floatpays’ solution, employees are only charged a small transaction fee based on the amount withdrawn making financial inclusion a reality for most. Given how unscrupulous some lenders can be, that’s incredibly important.
If employees have specific needs, they can also use their earned wages to buy vouchers for electricity, airtime, data, medical care, food and clothing without paying a transaction fee. These vouchers are what Floatpays refers to as “responsible spend vouchers” and are part of its commitment to making employee financial wellness a reality by reducing the cost associated with emergency spending.
“Our research shows that South Africans spend about 60% of their take-home pay servicing debt,” says Liba. “And the interest rates charged by some lenders can trap them in a debt cycle that can take years to get out of. Some don’t even get to that point and end up having their homes and belongings repossessed.”
Floatpays is a financial wellness company and knows that it doesn’t serve employees well to have to dip into their upcoming salary every month because they’re running short on cash. For that reason, the financial wellness solution enables employers to set limits on how the product is used by their employees making sure they can make use of the benefits of the product during the pay cycle but in a responsible manner.
But this does not do enough to support employees on a journey to financial wellness, it serves to stop payday lending. The most important feature of the Floatpays solution is the support offered to employees to ensure that they can achieve financial wellness through better money management. Free financial education and a budget tool work in combination to help employees learn and then practise how to manage their money better.
The result of supporting employees with financial liquidity and money management education and tooling leads employees to a place where they have additional money available at the end of the month. Floatpays uses this positive change in spending behaviour to make it as easy as possible for employees to build a savings nest egg for themselves and their loved ones.
How? By offering employees a savings plan that links directly to their payroll cycle. Employees can earn interest on the money they save without any of the usual savings fees. They also have the flexibility to change their savings amount or pause their contributions whenever they need to, keeping the plan as flexible as possible to encourage saving.
“South Africans struggle with saving in general,” says Liba. “Research released earlier this year, for example, shows that 90% of South Africans cannot afford to retire. That’s a potential ticking time bomb and requires a broad range of stakeholders to foster a culture of saving. At Floatpays, we realised that one of the most effective ways of doing so was to link saving as closely as possible to people’s salaries.”
“Of course, with the month of Januworry as it’s called in South Africa rapidly approaching, encouraging people to save and ensure they have sufficient financial resources to see them through the toughest and longest month becomes imperative,” she adds. “That makes it even more important to ensure that employees are well equipped with the appropriate financial resources to ensure they have a good start to a year without the pressure of having to double down and borrow money to make it through January.”
Ultimately, with inflation showing little sign of slowing down and other factors like load shedding hampering economic growth, platforms like Floatpays will be essential for the financial resilience of South African workers. That, in turn, can only benefit their employers and improve the quality of life for employees.