5 ways to help employees beat their financial woes

As inflation and energy prices rises bite, employers have a duty to help their employees find solutions, says Personal Group

Five ways to help employees beat their financial woes.jpg 1

As the cost-of-living crisis grips the country, many employers are concerned about how they can protect their employees’ financial wellbeing.

According to the Joseph Rowntree Foundation, there has been a dramatic increase in the number of employees suffering ‘in-work poverty’, with one in eight workers struggling to make ends meet.

Spiralling debts due to an inability to make loan repayments, limited access to affordable credit and a lack of savings are three of the key financial problems regularly faced by employees.

Financial worries are a major cause of stress and anxiety, which affects an employee’s physical and mental health as well as their ability to perform at work. Employers need to take time to understand the money issues employees are facing and put plans in place to help them find workable solutions.

Offering low interest loans, introducing a savings strategy, and implementing an achievable debt reduction programme are three key ways that employers can support their staff manage their financial wellbeing.

1. Low interest loans

For employers, there has been a stigma attached to offering loans to employees and it was felt that employers should keep out of employees’ personal finances. Times have changed, and employers are expected to support employees in all areas of their lives to improve their health and wellbeing.

By offering a low interest loan, employers can have an easier conversation with their workforce about financial difficulties and offer a quick, easy and affordable solution to many of the problems they face. It is up to the employee to research the offer and decide if it right for them.

The provider should never pressurise anyone to take out a loan, in fact they offer a wide range of financial wellbeing tools to help people set up their own budgeting and savings plans before choosing a loan.

All communication comes direct from the loan provider, meaning that if an employee leaves the company, the loan reverts to direct debit payments with little administration for the employer.

Repayments can be taken directly from the employee’s salary with rates offered lower than other loans available on the open market. Because repayments are automatically taken from salary, there is less chance of the employee forgetting to make them.

2. Employee savings strategy

Building a savings cushion can help ease financial worries. It is important to have savings set aside to cover any unforeseen expenses. This is, of course, easier said than done. Employers can arrange a savings scheme via a third-party provider that allows savings to be made direct from salary straight into an employee’s personal savings pot.

Before embarking on a savings plan, these companies provide a range of financial tools to help employees work out monthly budgeting and find ways to reduce their outgoings.

Financial champions work with individual employees to suggest ways to cut costs to create expendable cash that can then be saved without adding financial pressure.

3. Pension awareness

It is crucial to highlight the importance of saving for retirement. Employers have a responsibility to help raise awareness of private pensions and the benefits that they offer to employees at retirement. The World Economic Forum (WEF) warns that the UK’s ever-increasing pension gap will reach over £25 trillion by 2050.

4. Help To Save scheme

For low-income employees, the government has introduced a Help to Save scheme which encourages employees to save between £1 and £50 per month, with the government matching 50p for every £1 saved. This saving is taken directly from salary and any employee eligible for Universal Tax Credit or Working Tax Credit can apply.

5. Debt reduction programme

More and more employers are contacting external providers to help employees better manage their finances.

Financial Wellness Group, for example, represents employees who may find themselves in serious debt and can negotiate with debt collection agencies on the employee’s behalf to agree a workable repayment plan. The employee will not receive threatening letters as these will be dealt with by Financial Wellness Group, significantly reducing their stress and worry.

With inflation now reaching the highest level for more than four decades, it is time for employers to act.

And with winter soon approaching, the impact of soaring energy bills will accelerate the financial strain. We will start to see a trend towards overworking, second jobs, extra shifts or hours as stressed and anxious employees look for their own solutions to cover a shortfall in income.

This will take its toll on employee health and wellbeing as well as productivity. In short, employers need to fulfil their social responsibilities by offering prudent and accessible solutions to protect their employees through these turbulent times.