A better way to pay and be paid

A better way to pay and be paid

Fintech entrepreneur David Brown is reimagining payroll for companies and employees alike

There’s no doubt that 2020 has been tough on employers and employees alike.

Governments around the world responded to the COVID-19 pandemic with regional and national lockdowns – shutting the doors on work and pleasure alike, shifting everyone who could work from home online and uncovering health and social inequities that will take sustained effort over the long term to make right.

And while the government has taken steps to try to avoid mass redundancies, the continued – and often confusing – restrictions are keeping the whole economy locked in limbo. Especially when – at the end of September – Chancellor Rishi Sunak used the term ‘viable’ to clarify which jobs would be saved with his Job Support Scheme that replaces furlough on 1 November 2020.

One person well-aware of the impact this will have on businesses is David Brown, a fintech entrepreneur who has launched a new product that revolutionises company finance and how workers are paid.

‘With COVID-19, suddenly the world had a big problem,’ he told me via Zoom recently. ‘Because the world was going to shut down, but you can’t shut down payroll. And that’s the biggest problem that every government in the world was faced with. Either everyone will be unemployed, or we’re going to be screwed.

‘Most governments moved to measures like furlough, which were the right tools for lockdown. But these businesses will need a lot of help to recover. If the business fails, the employee loses their job anyway.’

David told me that he sympathises with a lot of businesses right now that are being asked a difficult question: commit to employment when you don’t know if you’re going into lockdown again.

‘How can you commit to the future of your staff when you don’t know about the future of your company?

‘I felt Rishi’s announcement was very employee focused and it didn’t take enough consideration for the employer. It was “let’s protect the job but allow you to fail”. But by default, if you do that, you lose the job anyway. We need to strike a balance for both employers and employees to bring them through this.’

David believes we should address the problem in a better way.

He made the point that London is known as the fintech capital of the world, having spawned the most amazing fintech companies since the financial crisis. But in his opinion, the government haven’t used the innovations or the solutions in front of them; they haven’t harnessed what we’re good at and what we lead the world in – showing how fintech can solve the crisis.

One of these innovations he believes would help both sides is Hi – a unique digital payroll system he built in partnership with NTT Data, one of the world’s largest global IT services provider. Taking the idea of trade finance – where funds are advanced against unpaid invoices prior to customer payment – to the next level, David wanted to see if human capital could be financeable, raising funds against a company’s payroll instead.

‘Trade finance is about an invoice,’ David said. ‘You finance an invoice. But when you move to payroll, you don’t have an invoice. You have time. What we had to build was the ability to see time and payroll in a transparent manner. If we were going to finance time, we had to see it.’

He compares what Hi does to what Visa did for card payments by becoming a trusted source that guaranteed the transaction. If someone swipes their Visa card at the till, the business owner can be confident that they’ll receive the payment for the product or service.

‘We’ve built exactly the same for time. Anyone who wants to finance time needs a trusted source to verify that the employee worked the shift, the money belongs to them and you can give them the cash.’

David shared the following scenario to clarify how it works.

‘Let’s say there is a small restaurant with 20 employees and the owner pays each one £500 a week. So the owner needs to find £10,000 a week to pay the staff. After a bumper Christmas, everyone gets a bonus, but then January hits and business slows down.

‘Wouldn’t it be great,’ David said, ‘if I could come in and cover their payroll for the next 8 weeks – give them £80,000 upfront – and let them focus on the business and deploy that £80,000 on things that will help them grow? And then wouldn’t it be great if the employees could be paid monthly, weekly or daily – completely their choice?

‘Hi was designed to help businesses through the trading fluctuations – it gives them working capital when they need it based on payroll obligations because we see that as a secure asset. It’s built for times of great uncertainty.

‘What we’ve done is give the business working capital relief, but we’ve actually improved the lives of all the employees that work for that business.’

Louis Hansel, Unsplash

Which leads on to the WHY behind the platform…

‘I tend to get involved in projects that have a social outcome, they have a social cause,’ David said. ‘And if they don’t have a social cause, I don’t really have a lot of interest in them.’

In David’s mind, the social cause in this instance is the unfair and unjust way employees are paid.

Over 80% of the UK population are on monthly pay. But 80% of those people would struggle to find £250 for an emergency. If you get a puncture in your tyre halfway through the month, you’re screwed even though your employer owes you your monthly wage.

‘I believe we’re creating financial poverty because of the way we’re paying people. A lot of people can’t make it a month between paycheques. So, you’re forcing them to payday lenders and extortionate credit cards, massive overdraft rates – all because they’re waiting for you to pay them.

‘The sole purpose of doing this was to kill predatory lending, by saying a lot of people can’t wait a month. By giving them a weekly pay cycle, you’ll make their quality of life so much better.’

David says that when you look at payroll today, it doesn’t actually work. It constrains both parties.

‘Payroll can be an imprisonment for both parties. It imprisons the employer because every month he has to find a certain amount of money to make payroll happen. But by default, it also imprisons the employee because he has to wait for a whole month to get paid.’

By breaking free of the current constraints of payroll, both the employer and the employee can decide how to pay and be paid in the way that works for them. And because payroll is a legal obligation backed by the government’s guarantee, it’s easy for a financing party to back that. Companies are essential externally financing payroll. 

Annie Spratt, Unsplash

This new way of looking at payroll could turn our financial frameworks on their head.

‘Life is an evolution,’ he said. ‘Wouldn’t it be really nice if your life streamlined along with your wages? And what was left was your available balance? That kind of change in a digital world is achievable. But you need to start that change somewhere. To stay where you are – to stay on monthly pay – you’ll never achieve that change.

‘You have to say, we want to make pay fluid, we want to make pay real-time and if we can do, suddenly people get paid in real-time and none of the suppliers would need arrears departments because nothing would be in arrears. And wouldn’t it be nice if tax and the national insurance happened in real time as well? The future will be real-time as we move through this digital journey.’

I asked David if he thought COVID-19 would accelerate these changes.

‘We’re already reimagining the world. COVID-19 has massively taken us up the digital curve. We were on it before, but it feels like we’re now five years ahead because of COVID. But because we’ve gone five years ahead, it means we’ve got massive legacies behind us. There’s going to be a massive catch up now of the systems we use in life.

‘But surely pay should be making your life better not worse, shouldn’t it?’

You’ll get no arguments from me there… To learn more about Hi, visit https://www.hi55.uk/