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How HR can help employees with financial troubles

Money worries affect productivity but lines of credit, financial advice and EAPs can all help

Every day in the UK 209 people are declared insolvent or bankrupt; equivalent to one person every six minutes 53 seconds, according to the Money Charity.

So it’s likely all line managers will at some point in their career manage someone with financial problems. And with an average debt of £28,877 per adult, the need for HR to assist managers with this is clear.

“Debt is a major problem,” confirms Wayne Wild, director of industrial cutting specialist WEC Group, a company offering its staff, and now other firms, a FairQuid employee loan scheme. “Personal debts are at historically high levels and this must affect an employee’s mindset while at work,” he adds. “Personal stresses will be exaggerated when work stresses are loaded on top. Financial stress can have a disproportionate effect on the ability of an employee to perform.”

Wild warns that this impact can be devastating. “Staff with financial problems will invariably struggle to focus 100% on their work, and will make mistakes or miss opportunities,” he says. “The effect can be catastrophic to any business, large or small.”

Rob Briner, professor of organisational psychology at the University of Bath’s School of Management, agrees: “We know stress affects work in various ways,” he says. “Financial stress is an example of that. It is something that can remain hidden. It’s important to remember that debt isn’t something the employee is doing, but instead a situation they have found themselves in.

“It can have a number of causes, for example low pay or the use of dubious loan companies,” he adds. “Employers could consider offering lines of credit and advice on how to manage money, providing the tools people need for their own financial education.”

Gemma Reucroft, UK&I HR director for Tunstall, warns that workers may not be forthcoming about their debt issues. “As with mental health, there are barriers to employees coming forward and asking for help or telling someone that they are struggling,” she says. “Making this part of regular learning opportunities and including it among wider wellbeing activities can make it easier for employees to attend.

“An Employee Assistance Programme (EAP) can also be a significant benefit to those at risk of falling into debt or struggling with their finances. Many EAPs offer debt counselling or advice services. It is important for HR to regularly remind employees about the specific services available from the EAP and how they can help them.”

Reucroft suggests employers look to their pay structures as a more permanent way to change for the better. “One of the most powerful, practical and meaningful things an employer can do if they really care about the financial wellbeing of their employees is become an accredited living wage employer,” she says.

The voluntary living wage is calculated by the Living Wage Foundation, and is based on the basic cost of living in the UK. It is distinct from the National Living Wage introduced in the 2015 summer budget, which is a top-up to the minimum wage for the over-25s.

“We have an abundance of low paid work in the UK; a living wage is a way out of poverty and the trap of debt and borrowing,” adds Reucroft. “Research shows that employers who pay the voluntary living wage report positive impacts on recruitment, retention and absence from work.”

It is better to take action before employees fall into debt to begin with, she asserts.

“It is key for employers to look at the causes of stress within their own organisations and identify appropriate strategies to address them,” she says. “The focus should be on prevention, and this is where financial education and support can play a role.”