Three-quarters of workers do not receive the same pay each month, according to a new report by the Resolution Foundation.
The British think tank found that low-paid workers are most exposed to big downward changes in their monthly take-home pay. Four out of five earning around £10,000 per year experience pay volatility, compared to just two-thirds of higher paid workers (earning around £35,000 per year).
On average, workers could expect to lose 20% of their monthly pay, which equates to £250 – more than a typical monthly grocery bill.
Volatile pay is defined as having notable changes in pay from month to month that are down to more than just pay rises, promotions or bonuses. Around two in five workers experience ‘persistent volatility’, with significant changes in monthly pay at least six times a year.
- Life after IR35: agency workers much worse off
- Pay your workers the minimum wage, report urges Deliveroo
The Resolution Foundation gathered information from anonymous data from seven million Lloyds Banking Group bank accounts. The results reveal for the first time that pay volatility is the norm, not the exception, across Britain’s workforce.
Fewer opportunities to save
The think tank said this can put pressure on households’ ability to pay regular bills or build up their savings. Low- to middle-income earners typically cannot save more than £10 a month and have to borrow when their pay falls.
“Much of Britain, from our bills to our welfare state, is built around a steady monthly pay cheque,” Daniel Tomlinson, research and policy analyst at the Resolution Foundation, said. “But our research shows this is not the reality of working life for many of us. Around three in four workers experience big upward and downward changes in their monthly take-home pay. This volatility is a particular challenge for low paid workers, who are less likely to have savings to fall back on when their pay packets shrink, and yet are more likely to have big falls in monthly pay.”
Time to reduce zero-hours contracts
The organisation has called on firms and the government to do more to mitigate this by reducing the use of zero-hours and short-hours contracts, providing more notice of working hours, and reforming Universal Credit.
“Government and employers should look to support workers by reducing pay volatility, and mitigating its impact on workers’ living standards” Tomlinson said. “By providing more notice on shifts and avoiding unnecessary use of zero- and short-hours contracts, firms can lessen the effects of volatile pay on their employees. The government should also ensure Universal Credit is able to live up to its potential in softening the impact of volatile pay on family living standards.”