Spotlight on employee debt

Consumer debt in the UK is at an all-time high.

Money education charity Credit Action calculates the average household owes about 7,796 (excluding mortgages), and 47,546 including mortgages.

In total, UK personal debt has hit a whopping 1,174bn, a figure that is increasing by 1m every four minutes.

Debt counselling

An increasing number of employers are offering debt management and counselling services to their staff. Employees with money problems are likely to be stressed and unable to give 100% in the workplace, and HR can have a role in minimising the impact debt has on employees.
Organisations frequently offer debt counselling as part of a wider employee assistance programme (EAP). EAPs include a range of specialist information services and telephone and face-to-face counselling in areas such as legal advice, help with drug and alcohol dependency or gambling addiction, and advice on stress management.

Many EAP providers outsource the debt counselling element of their service to a third party. EAP company Calma, for instance, refers employees with financial worries to the Consumer Credit Counselling Service (CCCS), a charity.
“Financial advice is a tricky area and we found it difficult to find a provider who we could be sure was giving objective advice, so we chose the CCCS as our partner,” says Calma senior partner Rick Hughes.

Others work alongside agencies to broker payment plans on behalf of employees. Advisers act as intermediaries with creditors, helping employees to come up with affordable voluntary payment arrangements.

Other problems

Some organisations have even brought debt management in-house.

Often there will be other problems associated with the debt, such as a drug habit or a breakdown of a relationship. By tackling all of these problems together, counsellors can get to the root of the debt issue, says James Bradley, information services manager at employee assistance company Accor.

“If you help with debt and other ancillary problems, the payback employers get in terms of employee loyalty can be immeasurable,” he says.
And with greater loyalty comes better staff retention.

At passenger transport giant First Group, for example, workforce churn has reduced by 20% since the company introduced a series of schemes aimed at helping staff to budget effectively.

Many of First Group’s employees, such as its bus and train drivers, earn relatively low wages.
“Some are also migrant workers who may not be financially literate,” says John Chilman, head of reward at First Group.
The company has established a financial advice centre for employees and set up a credit union to encourage responsible saving. The credit union works by transferring money from an employee’s wage into a saving account each month.

Chilman says that, in the past year alone, these initiatives have helped five staff members facing eviction to keep hold of their homes.
“Many employees are disenfranchised from the banking system, and now here is an alternative,” he says.

Debt management – the options

  • Include debt management or counselling as part of a wider employee assistance programme
  • Employ an in-house debt management service
  • Consider introducing money management courses or a savings scheme
  • Point employees to the Citizens Advice Bureau

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