What is a payroll deduction savings scheme and how does it work?
Payroll deduction savings is when an employee chooses to save money directly from their wages. The savings are taken automatically from their pay before it reaches their bank account. It makes saving easier. It also helps build a regular savings habit without any extra effort.
Many employees struggle to build savings, with one in five having less than £100 set aside. Rising living costs, debt and unexpected expenses mean saving often gets pushed aside. The result? Stress, anxiety and getting stuck in survival mode.
When financial worries spill into the workplace, they affect more than just mood. Productivity drops. Absenteeism rises. Focus and performance suffer. Staff turnover increases. According to the Money and Pensions Service, around 13 million working days are lost due to financial stress each year.
Helping employees build a better financial future doesn’t have to be complex or costly. Employee savings scheme through payroll offers a simple solution. This “set and forget” approach helps turn saving into a habit. It makes it easier to prepare for life’s ups and downs. It also helps them focus better at work by reducing stress.
Contact us to explore how payroll pay and save can reduce employee stress and boost productivity
Why it’s hard for employees to save and how payroll saving makes it easier
Saving money sounds simple, but for many employees, it’s anything but.
Unexpected costs - like a broken boiler, car repairs or vets bills - can wipe out any progress. Without a financial buffer, people can be left scrambling. Budgeting is another barrier. Not everyone has the confidence or know-how to do it.
It’s easy to underestimate spending or forget one-off bills. Even for those who want to save, the biggest hurdle is often that the money’s there… until it isn’t. Once it lands in a current account, it’s tempting to spend it.
Employee savings schemes helps solve these problems. By taking a small amount from wages before it reaches the employee’s account, saving becomes automatic. There’s no decision to make each month. With payroll deduction savings there’s no need to rely on willpower.
Consistency builds momentum. Even small amounts saved regularly add up. Most importantly, saving through payroll makes it effortless. It removes the friction that often stops people from getting started. There’s no separate transfer to arrange, no app to download, no card to swipe. Just money going straight into an interest-bearing savings pot - quietly and reliably. It gives employees more ability to deal with whatever life throws next.
How payroll pay and save works for employees and employers
Savings schemes through payroll with PayCaptain are designed to make saving simple, stress-free and automatic.
Each time an employee gets paid, a chosen amount is set aside from their net salary. This happens before it reaches their bank account. It goes straight into a linked savings account. There’s no separate transaction needed or a need to remember to transfer funds manually.
Employees choose how much to save. It could be as little as £10 per month, or a percentage of their net pay. The key is that it's regular and automatic. Because it happens before the money is visible, it removes the temptation to spend it.
Savings are completely flexible. Employees can change the amount, pause contributions or withdraw their savings at any time.
PayCaptain’s mobile payroll app gives employees full visibility and control. They can check their savings balance, set savings goals or adjust their contribution. This can be done direct from their phone.
For employers, there’s no extra admin. Payroll savings is core functionality in PayCaptain’s payroll software and managed alongside regular payroll tasks. It’s a smart, low-effort way to help employees build a financial reserve, without adding to the business’s workload.
Book a demo to see how you can support employee saving with no extra admin
How to encourage employees to start using payroll saving
How to communicate employee savings schemes effectively
Employees won’t take part in a savings scheme if they don’t understand how it works or why it matters.
Clear, simple communication is key. Employers should start by explaining the benefits:
- Stress free saving that happens automatically once it’s set up
- Gives employees better control over their money
- Builds a financial buffer for emergencies
Employers should make it clear that savings are flexible and accessible and even small, regular amounts make a big difference.
When explaining the benefits of payroll deduction savings, employers should avoid jargon. They should focus on real-life outcomes. A great way to do this is to help employees picture what saving £20 a month could mean in six months’ time.
- Share success stories. A testimonial from an employee who avoided a payday loan thanks to payroll saving is more powerful than any policy document. These stories make the benefit feel real and achievable
- Use different channels to explain the benefits of payroll pay and save. Emails, payslip notes, posters or team briefings all raise awareness and keep the message front of mind
When your team understands employee savings schemes and see that other employees are benefiting, they’re more likely to take part.
Include employee payroll saving schemes in employee onboarding and training
Introducing the benefit early helps build a savings habit from day one.
Include information about saving through payroll in onboarding packs and induction meetings. It can be made part of the conversation when new employees are learning about their pay, pensions and benefits.
A simple explanation of how to start saving along with how easy it is to change or pause contributions can boost sign-ups.
Employees can also be offered ongoing training. Short webinars, how-to videos or guides can show employees how to set up and manage their savings through the payroll app. The more confident they feel, the more likely they are to get involved.
How to keep employee savings top of mind with regular reminders and encouragement
Even with a good start, employees may need reminders to keep saving.
- Use regular prompts to keep employees saving directly from wages visible. This can be through monthly newsletters, payslip messages or posters in staff rooms. By reminding employees they can start small and build savings gradually will improve uptake
- Celebrate success. Milestones like reaching a £100 savings balance or having 100 employees enrolled are worth sharing. It keeps momentum going and helps show the workplace values financial wellbeing.
Encouragement, visibility and small wins all help turn payroll saving into a lasting habit.
Financial wellbeing resources and education for employees
Budgeting tools and apps to support financial wellbeing
Budgeting is the core of good financial wellbeing. But many people don’t know where to start.
Employers can support staff by signposting to free, trusted tools. These include budgeting tools in the PayCaptain app and MoneyHelper’s budget planner. Apps and planners like this help employees:
- Track where their money goes
- Spot areas where they can cut back
- Set realistic spending and saving goals
These tools take the guesswork out of money management. When employees feel more in control of their money, they can plan ahead better, build savings and reduce stress.
Find out how PayCaptain’s app helps employees budget and save with ease
How financial literacy workshops support employee money management
Financial education is one of the most practical ways to help employees build money confidence.
Topics like budgeting, saving and managing debt make a real difference. This is especially the case when delivered in plain, jargon-free language. Financial literacy workshops can be run in person or online. They can be tailored to the needs of different employee groups.
Bringing in external experts or financial wellbeing providers means advice is up to date. It’s also a safe space for employees to ask questions they might not feel comfortable asking elsewhere.
Where possible, employers can offer one-to-one sessions or drop-ins for more personalised guidance. Not everyone’s financial situation is the same. Some may need help planning for retirement, others with debt or managing costs as a new parent.
By offering a mix of education and personal support, businesses can help employees to take control of their finances. By doing so, they’ll have a more secure future.
Why offering access to financial advisors supports employee wellbeing
Access to financial advisors gives employees the chance to plan with more confidence.
Long-term financial goals can feel overwhelming without expert support. Advisors can help employees understand their options. With this support, they can make informed decisions and build a plan that fits their circumstances.
Employers can offer this support by partnering with local advisory firms or financial wellbeing platforms. Some larger businesses may choose to bring advisors in house.
Even offering a few free sessions per year, or subsidised advice, shows a real commitment to employee wellbeing. It also helps reduce the risk of poor financial decisions and gives staff peace of mind.
When employees feel supported with money matters, they’re more likely to stay focused, productive and loyal at work.
Final thoughts from PayCaptain
Financial wellbeing is a growing priority for employers. For good reason. When employees feel more secure with their money, they’re less stressed, more focused and better able to thrive at work.
Saving money direct from payroll is one of the most effective tools to support this. This make saving automatic, helping employees build up a financial buffer without the pressure of managing separate transfers or remembering to put money aside.
PayCaptain offers a range of savings tools to support different needs and goals:
SmartPay is a personalised payroll feature that helps employees make better financial decisions when they get paid. Rather than simply splitting pay, SmartPay prompts employees with personalised, in-app suggestions. These prompts may be to save, pay off debt or add more to their pension. The prompts are based on each employee’s circumstances and financial goals. They’re timely, relevant and easy to act on.
By guiding employees to take small, positive actions each pay cycle, SmartPay helps build long-term financial resilience in a way that feels natural and achievable.
Savings pots from PayCaptain help employees build a financial safety net with ease. Set up through the PayCaptain payroll app, savings pots let employees automatically save small amounts from each payday. Money from employee savings schemes can be transferred from net pay directly into the pots without needing to do anything manually. The money is instantly available with no fees or penalties. These savings pots are ideal for growing a buffer for emergencies or planned expenses.
By making saving simple and stress-free, savings pots is another way to support financial wellbeing. They can give employees more confidence in their future.
When employers promote employee savings schemes through payroll, they help build a stronger financial future.
They're simple to set up and the impact can be long-lasting. They’re a powerful step to creating a workplace where employees feel supported and more in control of their money.
Learn more about how employee savings schemes add value for your team.
