How to support employees to take control of their finances


The income of many households across the UK has been seriously impacted by the pandemic, with many people having been made redundant and others having to manage on a reduced income. This is having a direct affect on employee financial wellbeing.

How to support employees to take control of their finances

Even if employees haven’t been directly impacted by Covid-19, it will have highlighted the importance of having enough savings to support them through difficult times, and many will turn to their employer for support with this.

To help employees take control of their finances in 2021, we have created a list of ‘New Year financial resolutions for uncertain times’:

1. Review financial position and budget

Employees should work out exactly what their income is, and if they are on furlough or reduced hours, they need to work out what their take home pay will be. If they are facing redundancy they will need to consider how their income may change. They will then need to look at what assets they have, such as pensions, savings, ISAs, property and investments; and what liabilities they have including mortgage/rent, debt, childcare, insurance and utility bills.

Finally, they should work out their household income and expenses. If the amount of money they need each month is more than the amount they have coming in, they can work out what action is needed to cover the costs. The Money Advice Service has a great budget planner.

2. Review all outgoings

It is important for employees to check their bank statements and make a list of what is being spent each month. It is helpful to divide these into utility bills (gas, electricity and water), mortgage or rent costs, council tax, supermarket shopping, monthly contracts for TV, broadband and mobiles, insurance, regular subscriptions, and other spending. This will highlight where money is going and where savings could be made.

To many it became clear during lockdown how much is usually spent on nights out, day trips, holidays and experiences. Whilst these have all been missed, it is useful to be aware of how much they cost, and perhaps be a bit more discerning in the future when deciding where your disposable income goes. Now is also a good time to cancel any unused subscriptions, or unused memberships.

3. Apply for help with mortgage or rent payments

If employees are struggling to pay their mortgage or rent, they should look at what help is available. The government has agreed with mortgage lenders that they should continue to offer a mortgage payment holiday. This can provide homeowners who are struggling to pay their mortgage with up to two payment holidays of up to six months in total. Each payment holiday can only be up to three months at a time before it must be reviewed. 

Taking a payment holiday will not affect credit ratings, however credit files are not the only source of information that lenders can use in lending decisions.  Employees will need to keep in mind that monthly payments will be recalculated when restarted after a mortgage holiday and may increase.

Those struggling with their repayments should contact their providers as soon as possible to discuss the support they can offer. Those who do not qualify for a mortgage payment holiday can request tailored support from their lender.

For those who are renting their home, the rules have been extended to protect tenants from eviction until at least 31 January 2021. Employees should speak to their landlord about rent payments if they are in financial difficulty. Landlords and tenants are expected to work together to establish an affordable repayment plan. Their landlord may be able to take a mortgage holiday and therefore delay your rent payments.

4. Make managing debt a priority

If employees are in financial difficulty, they should speak to their lender before any payments are missed. Lenders may discuss the option to transfer debt to alternative products that have more favourable terms.

When it comes to credit cards, personal loans and motor finance, employees may be entitled to apply for a payment holiday of up to six months, including any payment holidays they have received previously. Lenders will only offer a payment holiday of up to three months at a time, however this may be extended to the maximum six months. If employees are struggling with an overdraft they should speak to their bank or building society about the support they can offer. There is more information about the options available on the Financial Conduct Authority’s (FCA) website.

There are many different types of debt with varying rates of interest, and it is often a good idea to pay off expensive debts first. Credit cards and overdrafts can have rates of 18% up to 40%, with payday loans having rates of 1,500% and more!

An example we have put together using the Money Advice Service’s credit card calculator shows: A debt of £3,000 with a rate of 18% APR, could take 10 years and 10 months to pay off if paying £50 a month, with a total interest paid of £3,495. If that monthly payment was increased to £100 a month, the debt would be paid off in three years and four months, and interest paid would be only £908.

A good option could be to consolidate any debts into a 0% or low interest balance transfer card, as more money will go towards paying the debt off and enable it to be cleared over a shorter time period. Whatever method employees choose, it’s always best to make paying off debt a priority.

5. Take control of retirement savings

Employees may be tempted to reduce or pause pension contributions if they are in financial difficulty. However, they should plan carefully before doing this, because if they can afford to continue making regular investments this is likely to create a larger pension pot for their retirement. Pension contributions for furloughed employees will continue, but these will usually be based on the reduced furlough payment.

6. Be a savvy shopper

By switching brands it might be possible for employees to significantly reduce the price of their regular shop. In addition, by planning their weekly shop in advance, it may help them to search for deals and reduce expenditure on non-essential items. Discount vouchers are often available through voucher and discount websites. Employers should also make sure that employees are aware of any discount vouchers schemes available through the workplace.

7. Check for savings on utilities and broadband deals

It is possible for employees to save a lot of money by shopping around for cheaper utilities and broadband providers. There are many comparison services out there to help them make the switch. For example, by shopping around 50% of people could achieve a saving of £338 on their dual fuel energy cost, according to comparethemarket.com May 2020 data.

8. Watch out for auto-renewals

Many insurance policies for cars, homes and travel, automatically renew each year, but people may be paying more than they need to if they allow this to happen. To get the best deal and to avoid any potential price hikes with auto-renewals, employees should make sure they find out when their contract is due to end, and put it in their diary for a few weeks earlier, so they have plenty of time to shop around, and switch or haggle where appropriate.

9. Beware of investment scams

Unfortunately in turbulent times like these, scammers see an opportunity! It is important for employees to be on their guard. Scammers tend to sound completely legitimate and it’s easy to see why so many people are fooled. Before going ahead with any investments, it’s vital that employees  check whether the company is registered with the FCA. They can also visit the FCA’s ScamSmart website which includes a warning list of companies operating without authorisation or running scams.

10. Take action

It’s easy to bury your head in the sand when it comes to sorting out your finances, but any savings made now can make a big difference in the long term. It’s always worth speaking to lenders to see if they can help if struggling with repayments, and Citizens Advice can help employees understand how to deal with any debt. Many employers can offer their staff help through financial education and guidance.

The New Year is a great time for employees to take control of their finances. Whether affected by reduced household income, or simply realising that they would like to have more savings to support them through difficult times, now is the time for employers to take action and help their employees feel financially secure.

The best way to do this is through the provision of financial education, guidance and regulated financial advice. Many companies are now seeing the benefit of sourcing specialist providers to help with this and it often forms part of their overall wellbeing strategy.

The author is Jonathan Watts-Lay, director at WEALTH at work.

This article is provided by WEALTH at work.


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