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Financial stability is a privilege few have and one that has been tested time and time again during these pandemic years. A recent study by EY found that 80% of Indians were out of money by the end of the month and more than a third were out of money by the middle of the month. And that’s just taking into account regular household expenses. Imagine the distress of having to deal with an unexpected hospitalization, an all-too-common occurrence at the height of the pandemic.
For the many Indian employees, especially blue-collar workers, who are struggling to make ends meet, such unforeseen expenses can send them into a spiral of debt. Many do not have favorable credit scores and do not have access to formal credit.
Blue collar workers are the backbone of our economy. They make up a large percentage of India’s total workforce, which is estimated at about 500 million at present, of which about 210 million belong to agricultural and related sectors, while the rest work in agricultural and related sectors. such as construction and real estate, manufacturing and utilities, retail, e-commerce, transportation and logistics.
Financial literacy is also quite low among this group and as a result, they end up falling prey to predatory lending practices like payday loans and other lending apps that charge high interest rates. These services are happy to provide loans, but at such exorbitant interest rates that most struggle to repay the interest, let alone the principal. There are several stories of borrowers being harassed by debt collectors, which further complicates their lives. As regulators crack down on these unregulated activities, oversight of informal lending will always be a challenge.
In this context, access to salary on demand or earned salary appears to be an innovative and risk-free financing solution. The product is designed to meet the income needs of workers of all categories and salary brackets, preventing them from falling prey to cycles of debt. Earned salary access simply means that you, as an employee, will have complete freedom and quick access to your earned salary at all times, proactively meeting your financial needs. If you’ve worked 10 days, on-demand pay gives you access to the equivalent of those days’ pay. You are not required to pay interest because it is not a loan or credit, or even an advance on your salary. It is simply a matter of withdrawing and spending the money you have rightfully worked and earned for.
How on-demand pay can financially empower the blue-collar economy
The EY report notes that “about 81% of Indian employees who experienced financial hardship reported mental health issues, health issues and low morale.”
This problem is most apparent within the blue collar workforce. According to a study by CIBIL, there are about 120 million households whose annual income is between INR 2 lakh and INR 5 lakh. Most of these households struggle to maintain a sufficient level of income and struggle to manage their spending towards the end of the month. They also struggle with a lack of financial awareness and have limited access to affordable financial solutions.
Asking wages can prevent these workers from falling into the debt trap by empowering them. Rising living expenses, the high cost of health care and the need to deal with the unexpected make managing personal finances a daunting challenge, especially for blue-collar workers, hence access to their own earned income acts as a security blanket. Most importantly, it gives a strong sense of independence, of dignity not having to depend on others for liquidity.
Employers also benefit
The biggest benefit of activating this solution is better productivity through less stressed employees and better long-term retention. It is also an attractive proposition for new hires in a job-rich market, as it brings a competitive edge to employers, making it an organization of choice to work with. Nearly 60% of Indian employees said that on-demand pay would be a deciding factor for their next job. Additionally, in the digital age, where processing modern digital payroll systems is becoming the norm, pay-on-demand is a progressive and simple plug-and-play concept. It integrates with a company’s existing payroll system without any cost, risk and change.
According to the BCG report’Unleashing the potential of the Gig Economy in India’around 24 million new jobs could be created in the blue-collar space, and by 2028 this could reach around 90 million jobs.
Companies that come together to create opportunities for the blue-collar segment by upgrading them technologically will not only open up a whole new plethora of jobs, for hitherto semi-skilled workers, but are also a means of their prepare for a better future. and their generations to come. On top of that, many fintechs strive to provide them with financial stability. These efforts will ultimately lead to the growth of the global economy.