- Research shows 18-24 year olds are left in the dark about their pay, with 29% saying understanding pay changes would help them make better financial decisions
- 41% are left to figure out pay changes themselves or seek explanation from their employers
- Employee confusion over pay changes is costing businesses an estimated £960m annually
Younger workers are facing confusion in their pay, leaving many ill-equipped to manage their finances and reliant on their employers for support, according to research from PayFit.
A new survey* of over 2,000 working adults highlights a growing crisis with financial literacy, revealing that 59% of 18-24 year olds do not fully understand why their pay changes - leaving them vulnerable to financial mismanagement. Nearly one in three (29%) believe that understanding these changes would enable them to make better financial decisions and save more effectively and are calling on employers to provide the necessary education and resources to support their younger workforce.
The data highlights a significant gap in understanding pay, pensions, and benefits among young workers. The concept of salary sacrifice adjustments is perhaps the most misunderstood, with just 9% of 18-24 year olds feeling confident they could explain it, as opposed to 24% for everyone else. Personal pension contributions are another area of concern, with only 16% of 18-24 year olds confident in their understanding, compared to 39% of older employees - rising to 56% for those aged over 55.
When it comes to National Insurance contributions, just 27% of young people feel confident they could explain them, a stark contrast to 53% of their older counterparts and 70% of those over 55. Only 44% of 18-24 year olds say they could confidently explain how their holiday pay is calculated compared to 55% of older workers (62% for the over 55s).
Worryingly, when there are changes to their pay packet, 41% of 18-24 year olds are left to figure out pay changes themselves and need to seek explanations from their employers.
Firmin Zocchetto, CEO and Co-Founder of PayFit, comments: “Employers that are slow to educate their staff about pay are setting themselves up for a fall. When employees are uncertain about their pay changes, it becomes a time-wasting trap that costs businesses £960m annually**. It also breeds mistrust, erodes motivation, and weakens loyalty. But here's the good news: by being transparent on how pay is calculated and providing financial education, employers can turn this around, creating a more informed and committed workforce.”
Although a whopping 86% of 18-24 year olds do not fully trust their employer, 42% would feel more favourable toward them if they were educated on how to increase take-home pay and save money, according to the same research.
Many workers would be more motivated to contribute to their pensions and savings if their employer provided resources like financial planning tools (28%), reminders about pension contributions (25%), and tax savings insights (22%).
It’s not just 18-24 year olds who want to get on top of their finances, with just 11% of employees of all ages admitting they are happy with their current pay and that it is enough for their needs. And, with the ongoing cost of living pressures, one in four worry their pay isn’t enough to keep up with rising costs.
A separate report from Step Change, Britain’s largest debt advice service, backs up these findings, showing a steady increase in the proportion of full-time employees seeking help, up from 38% in 2021 to 44% by the end of 2023. This highlights the urgent need for better financial planning and support, as more people struggle to manage negative budgets.
With employers unlikely to hand out pay rises due to increased National Insurance following the budget and other rising costs***, better education and understanding of how to stretch their pay further is more important than ever.
Rhiannon Byers, Head of Workplace & Community Programmes at The Money Charity, says: “At The Money Charity, we’ve engaged hundreds of thousands of people of all ages with how to understand and manage their money well in order to achieve their financial goals. But as these findings clearly show, there is still so much more needed. Financial education has been on the secondary curriculum since 2014, but pickup, implementation and resourcing have been sorely lacking, so we continue seeing young workers entering the workforce with low knowledge, and often lower confidence, on money management. But it’s never too late to learn, and employers can play a crucial role in helping meet this need, through providing clear communications, resources and impartial training sessions like those we offer.”
Employers can find out more through the following resources:
The Money Charity: https://themoneycharity.org.uk/
Money A + E: https://www.moneyaande.co.uk/
FT FLIC: https://ftflic.com/
Just Finance Foundation: https://www.justfinancefoundation.org.uk/
TISA: https://www.tisa.uk.com/
* The survey was carried out online by Research Without Barriers between 23rd December 2024 and 2nd January 2025. The sample comprised 2,016 UK working adults.
** Cost to Business Methodology:
The average hourly rate for senior HR professionals is £31.73 (source: Glassdoor on average base pay of a 'head HR manager')
Payroll team tasks were estimated to take 2.08 hours per period (assuming one pay period is 1 month). Source PayFit UK Payroll & Society 2025 survey
Multiply the monthly hours (2.08) by 12 to get the annual hours: 24.96 hours
Multiply the annual hours by the average hourly rate to get the total cost: £792.33
Multiply this by the number of small businesses in the UK (source: UK Government) to get the total cost for all small businesses: £4,363,814,208
Factor in that 22% of employees ask for an explanation of their pay (source PayFit financial literacy survey): Multiply 22% by £4,363,814,208 to get total cost to small businesses: £960,039,126
*** Rising business costs dampen pay increase prospects:
- Tax rises in budget sap UK consumer confidence and will hit pay growth, say reports | Economics | The Guardian
- Tax rises will push business leaders to cut costs and hiring, surveys show | Business | The Guardian
