Employers must take some responsibility for employee financial wellbeing
“Consumers have become increasingly debt-stressed and financially vulnerable in recent months” says Paul Slot, Director of Octogen, personal finance wellbeing and debt counsellor specialists. “Bad debts and arrears have reached all time highs, consumers are depleting their savings and cancelling policies, and with over 900 000 South Africans having lost their jobs in the recession, there is great income insecurity.”
Slot says that financial stress follows the consumer from home to the workplace, and has a significant effect on productivity and absenteeism. “Besides having to cope with already overstretched personal finances, there are the possibilities of downsizing and retrenchments, reduction of overtime, introduction of short time, falling commissions, and operational restructuring. Even if we come out of recession at the end of this year, the effects will linger for at least another 12 to 18 months.”
Employers undoubtedly have an active role to play in the financial wellbeing of employees. Slot says a good employee wellbeing service in the workplace, now and for at least the next year, is absolutely key. “The value of such a program is directly related to worker productivity. Many studies have examined and confirmed the relationship between financial distress and the amount of time diverted to dealing with these issues when at work. Much time at the workplace can be wasted as credit providers make contact with employees during working hours, and very often employees spend time discussing their financial problems with fellow workers. This is most notable in the two weeks before payday.”
Slot explains there are two categories of financially distressed employees – those already with legal judgments and/or garnishee orders against their salaries; and those who are finding it difficult to meet repayments, already in arrears in some instances, but with no legal action as yet taken against them. “Employer assistance for these two broad categories needs to be different for each in order to be effective.”
In the first instance, where legal action has already been taken or where garnishee orders are in place, Slot says employers can do ‘damage control’. “They can employ experts to check the validity of the legal action and/or garnishee orders, ensure that no unnecessary payments are made, and that all fees being charged are within legal guidelines. In cases where there are multiple garnishee orders, these are frequently obtained independently of each other, and the total deduction should be examined to ensure that take home-pay is sufficient for living. These employees can be easily identified from the payroll and because the employer is already aware of their problems, these employees are less reluctant to ask for assistance.”
Employees in the second category are more difficult to identify and more reluctant to request help. “Typically these employees are making use of credit to supplement their lifestyle and their first reaction, when facing a cash flow problem, is to apply for additional credit, then go to family, friends and colleagues for loans, and then to simply stop paying bills. This category recognises early on they are in trouble but will delay finding a solution until the very end.”
Slot says this is where employers and a financial wellbeing program in the workplace can play an important role. “Constant programmes and messages about the possible remedies of debt-stress, for example debt-counselling, can lead to some very positive outcomes. These campaigns however must be ongoing and not simply a once off event. Such programmes should encourage employees to take stock of their own financial position instead of shying away reality. An effective financial wellbeing program would include the availability of a confidential personal financial assessment service.”
Part of a good wellness programme is the design and then active management of personal budgets. Slot interestingly observes that low income earners tend to have a much better grasp on their monthly commitments than middle income earners. “It is surprising how many people have never drawn up a personal budget. Also key over the next few months will be messages imploring consumers to plan and spend wisely this Christmas.”
“And in the current economic recession, combined with several price increases such as electricity looming ahead, budgeting is essential. Some expenses will have to be rearranged in order to make room for the significant increases in utilities that lie in wait for SA households. Consumers should not simply take on more debt or default further on account payments in order to cope – this is not the solution.”
A financial wellbeing programme would also promote the importance of savings. “We recommend everyone should establish an emergency fund of three times take-home pay. A good starting point for this saving could be the annual bonus or thirteenth cheque.”
Slot says staff should be regularly encouraged to make use of the Employee Financial Wellbeing Service offered by the company. “Employees can also benefit from short presentations from a specialist external service provider on key aspects of financial wellbeing.”
Extremely important during a downturn is that employers must communicate job security (or even insecurity if there is a possibility) to employees. “For example, what is the effect of the recession on the company? Will they have a job when they return in January? What is expected from employees by employers to ensure that they and the company come out intact at the other end of this recession?”
