On 30 July 2020, the FCA issued a statement setting out its view of the risks and benefits of Employer Salary Advance Schemes (ESAS) and what employers and employees should consider when using them.

The statement covers:

  • What ESAS offer.
  • What employees need to consider.
  • What employers need to consider. The FCA reminds employers that they need to consider all aspects of the scheme, the advantages and the potential risks, when offering ESAS to their employees. This includes matters such as the build-up of charges where the product is used repeatedly where employees might become dependent on the scheme.
  • How ESAS typically work.
  • The risks for employees and employers. The FCA discusses the following four risks: lack of credit regulation, lack of transparency about cost, dependency and repeat use and lack of visibility for credit reference agencies.
  • How employers and scheme operators can mitigate some of these risks. The FCA provides certain examples including that scheme operators could highlight, on the employee section of their websites or where they provide an app, that where the employee has underlying financial problems that a salary advance may not in itself be sufficient to resolve such issues and suggest that they seek financial help from a debt advice charity.
  • FCA ongoing work. The FCA intends to continue to monitor the ESAS market for developments including the emergence of new business models.