Financial stress has a direct impact on people’s productivity and efficiency at work. Employees who drown in debt cannot perform. Giving your staff access to formal debt consolidation and debt counselling processes, is one of the best ways to improve their overall wellness, and your bottom line.
South Africans are fighting the debt monster. On average, consumers spend 72% of their income on debt repayments, and 49% of us are more than one month in arrears with an account. This doesn’t mean that the remaining 50% are not under pressure. There is very little disposable income even with those who have a good credit rating and are in good standing with their creditors.
Just as employees do not leave their personalities or emotions at the factory gate or office entrance, they also bring their financial woes to work. According to the 2019 Consumer Credit Market Report, published by the National Credit Regulator, 59% of employees are stressed about their finances, and less than 15% of South Africans can afford retirement.
Against this backdrop, we have to ask whether employers put sufficient effort into creating programmes that educate, mentor and equip their employees to take control of their finances.
There is a school of thought that believes it is not the employer’s responsibility to help out in these personal arenas; but how can we not help the people on whose efforts our businesses are built? Your rights and responsibilities as an employer extend beyond the letter of an employment contract to include an awareness of, and willingness to address, employees’ financial stress.
Debt, in today’s economy, is not easy to manage. The problem is exacerbated by the ease with which people are able to access credit and, by extension, how they use that money.
Funding a lifestyle on credit is dangerous, as it only takes one mishap to get you into trouble. Too many employed people – from general workers to executives – live from pay check to pay check and are indebted to the point where their income barely covers monthly repayments. They count on annual salary increases and bonuses to balance their books; if these don’t materialise, or if an unexpected expense occurs, ruin becomes a reality.
At this point, people really need a loan but are unable to get it through formal, reputable credit channels due to their poor credit record and affordability profile. The only recourse for many is to turn to informal lenders, aptly known as loan sharks. The anxiety associated with being indebted to unregulated and often unscrupulous creditors further affects an individual’s mental attitude, wellbeing and ability to concentrate at work.
As an employer, you stand much to gain to put a programme in place that helps employees with debt consolidation and debt counselling, and improve their financial literacy, long before they fall victim to loan sharks.
Such financial literacy support should be extended to all employees, regardless of the category of indebtedness they find themselves in, which are:
- those in good standing with creditors
- distressed individuals
- the over-indebted
As an employer, you have a responsibility to help your employees – at least 60% of whom are struggling to make ends meet – manage their money better. Financial stress is often not a function of how much money people earn, but rather how well (or poorly) they manage their income and expenses.
A comprehensive and well-planned and executed financial wellness programme can help your employees to be cleared of judgements, improve their credit profiles, and find relief in debt consolidation supported by affordable and realistic payment plans.
Society needs credit-active people, provided their credit habits are responsible and funds are used to expand economic activity, instead of funding consumption spending. Formal processes with repayments that are affordable enable personal growth and wealth creation – and employers can and should actively help to create such an environment.