Companies today are increasingly expected to run businesses that are environmentally and socially responsible and have world class governance. Besides focusing on growth and profitability efforts , every company is required to have higher, more evolved Environmental, Social, and Governance (ESG) values. Consequently, around 121 companies1 have already included the Stakeholder Capitalism Metrics, set during the World Economic Forum’s (WEF) Sustainable Development Impact Meetings 2022, in their mainstream reporting materials, including annual reports and sustainability reports.
The increased focus on ESG, makes one thing clear – sustainable business for all stakeholders including the community will be the long-term winners. These aspects are looked upon not just from a compliance perspective to tick boxes, but from a genuine concern to make a tangible difference. Let’s look at how companies can take on the role of a social custodian by ensuring financial well-being.
The rise of the ‘S’ element
The ‘Social’ component of ESG includes a company’s health and safety track record, its policy on diversity, equity, and inclusion (DEI), and its labour relations between management and workers. External issues such as the company’s relationship with local community leaders, working conditions on the shop floors and on the supply side, and product safety also fall under this ambit.
In a world where ESG is now at the core of all company values, paying a good salary is not the only mark of creating a healthy, safe and humane workplace. In a way, the pandemic served as a turning point that tested companies’ ability to balance the social value with commerciality, profits and cash position. Only those who approached the entire situation with empathy managed to create real social equity. Besides helping employees and their families traverse through difficult times and ease into the new normal, some even went on to make contributions by offering medical support and resources to the surrounding community in which they operate.
Fulfilling the social element with financial wellness
An important lesson of the last two years is that an emergency always occurs without warning. Adequate monetary resources are needed to help people overcome the ensuing challenges. While several organisations have realised the impact of financial stress among its employees and have implemented steps to ensure financial wellness at the workplace, more needs to be done.
Most of the employed workforce in India rely on their monthly salary to support their entire household. This poses a challenge, especially for a low salaried employee, who could be in a sudden need of emergency funds right at the middle of the month. This problem is more acute for employees who do not have adequate financial reserves, access to credit, or the knowledge of financial planning. This forces many of them to borrow from loan sharks, who offer immediate credit, but at very high interest rates. Ensuring financial wellness of the employees and making them financially literate can help strengthen the social aspect of ESG.
Few companies offer advance salary for employees, but these come with approval processes which, at times, can prove to be humiliating for an employee who is apprehensive about expressing his sudden need for money.
Moreover, we live in the age of instant gratification where people have aspirational needs. For instance, people in India tend to purchase lifestyle goods and gold, during festive seasons. Most of them pay for this via instalments where the repayment is over 12-36 months. At times the instalments are due in the middle or end of the month and to meet these fund requirements, people tend to take on further loans to repay on time, thereby creating a debt cycle.
In such a scenario, Salary on-Demand or access to one’s salary as and when needed, has the power to save people from falling into debt cycles and manage their financial needs better. It can help meet unforeseen expenses with dignity and reduce their financial stress and improve productivity.
Salary On-Demand needs to be distinguished from payday loans, which are popular in the west and are typically provided by loan sharks and collected from the employees over 12-24 months with extremely high interest rates. In case of Earned Wage Access or Salary On-Demand, the employee can access a percentage of their earned wage in the middle of their paycycle, usually for a small transaction fee paid upfront and there is no interest fee or repayment required.
A future of social welfare
The next generation of employees will not associate with businesses that don’t care for the environment, the society, fairness, governance, and the likes even if they make money. As seen in KPMG’s 2022 CEO Outlook, CEOs increasingly agree that ESG programs improve financial performance, which includes being able to secure talent, strengthen employee value propositions, attract loyal customers, and raise capital.
While the financial wellness industry in India is still emerging, its potential to elevate the social wellbeing of people in the country is immense. Positive results of on-demand salary have associated it with decreasing employee-debt, increasing retention, and recognised by human resource management for its potential for social welfare. Even in its early days of implementation, companies with this facility have seen an increase in retention and ability to hire faster, which means it can certainly help expand an organisation’s social equity pie for the better.
Authored by
Chitresh Sharma, CEO & Co-founder, Refyne
