Joining a Credit Union Through Your Employer, Trade or Profession

A credit union is a not-for-profit lender owned by its members, and membership depends on sharing a "common bond" with the other people in it¹. That bond can be based on where you live, but it can equally be based on where you work, the industry you work in, or the trade union you belong to¹. If your employer, sector or union is part of a credit union's bond, your job is the thing that makes you eligible.

Many of these credit unions also run a payroll deduction scheme. Money is taken from your wages on pay day, at the same time as tax and any other deductions, and reaches your credit union account a few days later³. It can fund savings, loan repayments, or both. The scheme is free to you and to your employer⁴.

This page covers how the employment route into a credit union works, what payroll deduction does and does not change, and what happens to your account when your job does.

The common bond: why your job can make you eligible

Every credit union is built around a common bond, and that is the rule that decides who can join⁹. The bond can be based on where members live or work, the type of occupation they have, or their employer⁸. Some credit unions use a single basis, others combine several.

An employment-based bond can be broad. Capital Credit Union describes its common bond as employment-based, which means anyone working in the UK can join¹⁰. Its membership rules set out the detail: you can usually join if you work in an eligible UK occupation, whether full-time, part-time or on a temporary basis, have retired from one and receive a private pension, live in the same household as an existing member, or belong to a listed partner organisation¹¹.

Others are narrower. Keep Credit Union requires you to work for one of the employers listed in its common bond, or to be a close relative of an existing member employed by one of those employers and living at the same address¹². Willowfield Credit Union's bond is that members must live or work within its areas¹³. Lisburn Credit Union puts it plainly: membership is open to people who have a common bond with other members, which can be based on the area they live in, the occupation they work in, or the employer they work for¹⁴.

Family membership often follows. As long as one member of a family meets the common bond and has joined, other family members living at the same address can usually join too⁹. Anyone in the house of a person with a common bond can usually join¹⁵. If you are unsure which credit union covers your job, the common bond guide sets out the categories, and finding a credit union you can join covers how to search by employer, industry or postcode.

How payroll deduction works

Payroll deduction is a standing instruction to your employer's payroll system. On pay day, your chosen savings and loan repayments are taken off at the same time as tax and any other deductions, and appear in your credit union account a few days later³. The money never passes through your bank account, so it is saved before you have a chance to spend it¹⁶.

Setting it up usually takes one form. If your organisation supports the scheme, you join the credit union and complete a payroll deduction mandate, and the credit union does the rest¹⁶. If you are already a member and your employer is already a partner, you complete a payroll deduction amendment and select how much you want to save³. Moray Firth Credit Union's workplace scheme follows the same three steps: join, decide the amount you wish to save, then contact your employer or payroll department¹⁷.

The amount is yours to choose. Grampian Credit Union has promoted saving from £12 a month through payroll¹⁸. Deductions can cover savings alone, loan repayments alone, or both at once, and some credit unions run a combined "save as you repay" arrangement where you build savings while clearing a loan¹⁹.

Payroll deduction is free to you and your employer

The scheme costs nothing on either side. Just Credit Union states the service is free to both the member and the employer and very easy to set up⁴. SaveEasy Credit Union describes it as a cost-free staff benefit that employers can use to enhance the package they offer while improving the financial wellbeing of their staff¹⁶. Credit Union (formerly London Mutual) says its salary deduction scheme is offered at no cost to the employer⁵, and the Salary Savings Scheme states the credit union provides the service to a business without charge²⁰.

For an employer, that makes it a benefit with no direct cost. For a member, it means the only money leaving your pay is the amount you chose to save or repay. There is no fee for the deduction itself.

Loans repaid from your wages

A loan taken out through a payroll partner is repaid the same way as the savings. Keep Credit Union says repayments are taken directly from your salary so the loan is repaid manageably and consistently over time²¹. Calderdale Credit Union's partner employee loan is repaid by payroll deduction directly from the employer²². Darlington Credit Union's payroll scheme loan has repayments deducted straight from salary²¹, and Credit Union's personal loan offers convenient repayments taken directly from salary each month²³.

Where a credit union offers both routes, you may be able to choose. Capital Credit Union's loan agreement commits you to repay the loan plus interest in instalments by either payroll deduction or Direct Debit²⁴. East Kilbride Credit Union says that if your employer is one of its payroll partners, repayments can be deducted directly from your salary²⁰.

On cost, the picture is the same as any credit union loan. Credit unions are not-for-profit community lenders providing affordable loans and savings²⁵, and their borrowing is usually at a low interest rate with some flexibility in repayments²⁶. StepChange notes that credit unions can be a more affordable alternative to banks or expensive payday loans, and sometimes offer cheaper loan rates²⁷. Some credit unions also pay a loan interest rebate, a refund of loan interest paid to all members who borrowed during the preceding financial year, which the credit union may choose to pay²⁸.

One limit is worth knowing. If you are a member of a credit union, you can usually borrow at least two or three times the amount you have in savings, depending on the credit union's loan policy²⁹. Payroll deduction does not change that calculation. The loan costs page explains how interest and early repayment work, and applying to borrow covers what a credit union looks at.

What your employer can and cannot see

The deduction is visible on your payslip, but the reason behind it is not. Capital Credit Union states that your employer only knows the amount to deduct from your salary each month⁶. They are not told your borrowing amount, your credit information or what the money is for⁶.

That matters if you would rather colleagues did not know you were borrowing. The payroll department processes a figure, not a purpose. The payroll privacy page goes into this in more detail.

How to join or change what you save through work

The route depends on whether your employer is already a partner.

1. Check whether your employer, industry or trade union is part of a credit union's common bond¹.
2. Join the credit union, which usually means proving your identity and your link to the bond⁹.
3. Decide how much you want deducted each month¹⁷.
4. Complete a payroll deduction mandate, or a payroll deduction amendment if you are already a member and your employer is already a partner³.
5. Contact your employer or payroll department to confirm the instruction¹⁷.

If you already save through payroll and want to change the amount, Leeds Credit Union asks members to email with their membership number and the amount they wish to be deducted³². Other credit unions handle changes through their own member services. If your employer is not a partner, you can still join on another basis and pay in by Direct Debit, standing order, cash at a credit union office or collection point, or through retail payment networks such as PayPoint and PayZone where available⁹. The paying in page compares the methods, and payroll deduction or paying in yourself sets out the trade-offs.

If you change jobs or move

Leaving your job does not end your membership. Capital Credit Union states that your savings and your membership stay with you, they are not tied to your job, and if you leave, your payroll deduction simply stops⁷. You can then carry on saving by another method, or leave the account as it is.

The same applies if you move house rather than change employer. The moving away page covers keeping your membership after a change of job or address, and getting your money out explains how withdrawals work, including any notice period on the account you hold.

Where the protection stops

Credit unions are regulated, and savings held with one are covered by the Financial Services Compensation Scheme. The credit unions guide sets out the limits and how they apply.

On borrowing, there is a limit to the protection you get. The Financial Ombudsman Service says that for credit union loans, the standards it applies, for example the level of checks a lender may have needed to do before lending, will typically be lower than those imposed on lenders and loans covered by CONC³³. In practice that means a complaint about unaffordable lending may be judged against a different standard than one about a bank loan. The ombudsman can still look at complaints about credit union borrowing³³.

If repayments become difficult, tell the credit union early. The falling behind page covers what happens and what to ask for. Free, impartial help is available from MoneyHelper, from debt advice charities such as StepChange, and from National Debtline²⁷.

Is the common bond rule changing?

The UK Government has said it will reform the common bond requirement so that a credit union serving people living in the same area can cover a population of up to 10 million, up from the current cap of 3 million⁸. That proposal concerns area-based common bonds. Employment, occupation and trade union bonds already exist under the current rules and are not the subject of the proposed cap⁸.

The wider history is that the 2011 Legislative Reform Order allowed credit unions to liberalise the common bond, enrol community groups and businesses, pay interest on savings and charge for additional services. The legislation page covers those reforms in full.