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Adding value to business clients

01 April 2009 Andre Snyman, Consumer Assist

In today's tight economic climate, many companies are struggling to survive and more than ever they need to rely on a productive, innovative workforce to contribute to the company's success.

However, the market conditions have also taken a toll on employees, many of whom find themselves in financial dire straits. The result is that companies, at a time when they most need their employees to be performing optimally, are facing increasing labour challenges because of their employees financial problems.

Companies under threat

Employee debt is having a profoundly negative impact on companies with productivity dipping, absenteeism rising and fraud increasing as employees battle to cope with rising debt. Staff refuse to answer phones because they fear creditors are on the line. Other workers are taking on extra jobs to make ends meet, and their resultant exhaustion has a direct impact on the quality of their work. Financially stressed staff contribute to friction in the workplace. We are increasingly being called in by companies ranging from very large banks to retail organisations and industrial producers to run financial wellness workshops to help their staff.

Employers experience three major problems. The first is absenteeism, since, by the third week of the month, staff can't get to work because they have no money to pay for transport, or they suffer from health conditions related to financial stress, this can range from heart conditions to ulcers, insomnia and anxiety. The second is a reduction in productivity, because staff are so preoccupied with financial problems, they can't focus on the job. The third is garnishee orders - about 10% of all employees have garnishee orders on their salaries and this opens the company to the risk of fraud because workers can't make ends meet.

Vicious cycle

People often do not realise they sign consent to judgement in terms of section 58 of the Magistrates Court Act when accessing a personal loan or funds from a microlender. They don't have to be informed by a creditor if judgement is taken against them. The court gives a garnishee order allowing money to be deducted from the salary of that person and three months later that individual looks for more credit because they can't survive. And so the cycle continues.
In the past sheriffs would confiscate assets, but so much has been repossessed already, it can't be sold. So taking money from the debtor's salary via a garnishee order is the preferred method of collecting debt. Unfortunately, unscrupulous lawyers and debt collectors often charge excessive fees and there are failures in the management and ethics of many garnishee orders. Some employees have up to 10 garnishee orders on their wages and earn zero at the end of a month, this is clearly an unhealthy situation.

Taking action

Companies can reduce the impact of employee debt on the company by enlisting the assistance of debt management organisations. BMW, as an example, tackled debt among their employees and saw absenteeism drop by 34%.
Based on research from Germany that showed debt counsellors reduce debt among employees by 15% and the number of creditors by 21%, BMW implemented debt counselling from 2006 to 2008, and saw a 53% reduction in debt among participating workers.
A broker responsible for bringing about a 30% reduction in absenteeism in a company becomes more than just an insurance salesman - he becomes an indispensible part of the company's management strategy.

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