The world as we know it has been flipped upside down in recent weeks and if, like me, you’re struggling to adjust to the new normal – you’re not alone.
Many people have sadly been made redundant, others have been put on furlough by their company, hours have been cut, self-employed and freelancers have lost work. New research from Wollit found two thirds (61%) of self-employed workers have had less or no work since the start of covid-19.
There are also many who are still having to put themselves at risk by going out to work – not least the incredible workers in the NHS. The reality is that many of the other unsung heroes who are still working – food delivery drivers, carers, supermarket employees – are people on minimum wage and, often, zero-hours contracts.
Zero-hours contract workers are among the least well off of all UK workers according to our research, earning on average just £287.28 per week – less than half of average UK household spending per week of £585.60. Often overlooked and overworked, people in insecure work can struggle to get the financial support they need. With fluctuating salary patterns, the self-employed, zero-hour and gig workers are often underserved by the traditional financial service sector. They also tend to have lower incomes than most, putting them in an even more difficult situation as they can struggle to build up the savings needed to tide them over when circumstances change.
The current pandemic and lockdown has exacerbated these problems even further. Income stability is the bedrock of financial health and without it, everything else can crumble. In fact, it’s so painful people say they would prefer a lower salary which was stable rather than a higher more volatile one. The current situation has brought this issue into the spotlight and many of us have a new appreciation for how quickly our income – and lives – can change. But just imagine if that happened month after month?
Millions of flexible workers, who live from pay cheque to pay cheque, were already facing economic instability. A pre-pandemic research report found that a quarter (24%) of flexible workers were experiencing problems with income volatility (up from 19% in 2017) and 36% said they would struggle to pay an unexpected bill of £100.
We can therefore assume that flexible workers, already struggling to make ends meet, will face further shortfalls over the coming weeks and months. Just because someone’s income has gone down, it doesn’t mean their financial obligations have. In fact, our research found 14% of self-employed workers have already fallen into debt, with 18% having no income coming into their household at all.
The few financial services that will lend to these types of earners are often high cost which can make their situation worse in the long run. However, even these options aren’t readily available at present. Over recent weeks, we’ve seen several payday loan companies temporarily stop applications. But the need for credit is still there. Already one in five (20%) self-employed people feel they have nowhere to turn.
Thankfully, there is light on the horizon. Fintechs across the UK have been stepping up to help individuals and small businesses. Recently a team of companies – including Credit Kudos and Fronted – created Covid Credit, a proof of concept app to help sole traders use open banking to prove loss of income due to coronavirus isolation, potentially allowing banks to release government loans faster.
Equally, we’ve brought forward the launch of our income stability tool to help these workers who are desperately in need. The Wollit Income Promise enables people to take home the same amount of money each month, even if their hours and earnings fluctuate. It provides vital interest-free cash top-ups when someone earns less than normal, which is only paid back when they earn more than normal.
Working patterns have changed for good. Job and income insecurity is here to stay and so the financial industry needs to create products and solutions that meet the needs of these workers. UK fintechs need to re-imagine the traditional products and build sustainable technology-driven solutions for millions of flexible workers across the globe. Technology will not only help solve the problem of income instability – ultimately it will also help address the associated issues such as poor mental and financial health, ensuring we can all get back on our feet as soon as possible.
By Liad Shababo, CEO and founder, Wollit