Increasing levels of personal debt and wage stagnation could be behind a rise in workplace finance solutions, a report suggests.
Howden Employee Benefits & Wellbeing has published a report on the solutions offered by three of the main workplace finance providers in the UK: Neyber, FairQuid and Salary Finance.
The report aims to help employers understand the workplace finance solutions and tools available, how they work and the most relevant options for their employees who are experiencing financial issues.
The Joseph Rowntree Foundation suggests one in eight workers are now in poverty, and the Money Advice Service reports that one in five (21%) adults say they are drowning in debt and money worries, with many saying that their mental health has deteriorated as a result.
Howden Employee Benefits & Wellbeing’s report suggests people who are in debt tend to turn first to more traditional loan providers, but if they have poor credit scores they may be declined and/or then seek providers of high interest repayment loans which can be hard to meet and may increase their debt in the long term.
Steve Herbert, head of benefits strategy, warned that a financially stressed and tired employee is likely to be less focused, engaged and productive, so it’s in an employer’s interest to support employees experiencing personal finance issues.
“We’re seeing more employers taking positive steps to support employees by introducing financial education programmes which can help employees to better understand and manage their monthly finances,” he added.
Herbert said workplace finance solutions used alongside financial education can be invaluable because they offer access to lower cost finance than some pay-day lenders, with more affordable repayments.
Lending decisions made through workplace finance solutions are typically based on more than an individual’s credit scores and affordability. Lenders consider someone’s employment status, service history and salary level and, as repayments are directly deducted from salary via payroll, they have more confidence the loan commitments will be maintained.
Other useful features include short-term savings vehicles, with contributions deducted via payroll, as well as credit score checkers and information about where to access debt management advice and online financial tools.
“Increasingly, employers are understanding the vital role of financial education in supporting employee wellbeing. But hand in hand with financial education, workplace finance can be a fantastic solution to help employees resolve debt issues,” said Herbert.