Challenging perceptions around employee debt

23 June 2015

Andrew had been a civil servant for 22 years when he began to struggle with debt. He had used credit to top up his income for some time, but following a change to his job role and a significant reduction in salary, his debts had become unmanageable.

He tried to deal with the situation through excess borrowing, but this inevitably made the problem worse, and over time it began to impact on his job. His productivity reduced, he lost focus and he started to make mistakes that were proving costly to his employer.

Andrew is the very real face of debt in 2015. Contrary perhaps to perception, research commissioned by PayPlan shows that 77% of people in debt are in employment, with 52% holding down full time jobs. Of these, 16.7% are in intermediate or senior management positions; while 41% of people on a Debt Management Plan with PayPlan earn more than the national average of £26,000 per year.

With so many working people struggling with managing their debt, it’s an issue that’s filtering into the workplace.

The broader impact of employee debt

Recent research from The Office for National Statistics revealed that 15 million working days are lost every year in the UK to stress, anxiety and depression. In a study by Christians Against Poverty, 42% of people seeking debt help confirmed that they had also been prescribed medicine to help them cope; revealing a clear correlation between the personal anxiety surrounding debt and the impact on UK business.

Yet despite this widespread problem, personal debt remains an issue that isn’t widely discussed between employers and employees.

Andrew himself eventually approached his Employee Assistance Provider (EAP) for help resolving his debt troubles, but was typical of the vast number of people who are reticent to speak to their employer about their situation.

“I was worried about using the service through work” he acknowledges. “Not because of work knowing that I was using the service, more admitting that there was a problem. But it was manifesting itself in my productivity and attention – I was attending meetings but not focusing. Trying to deal with the problem was taking up much of my time – and I wasn’t being paid to deal with my financial difficulties.”

When he did eventually own up during a performance review, he told his employer that he didn’t think the issue had impacted his work, but was informed that a distinct reduction in his performance had been noted. Luckily, his very understanding line manager gave him special leave to deal with his problems, allowing him time to get his finances in order and arrange repayment with PayPlan’s help.

Placing debt support at the heart of any employee wellbeing strategy

It’s true of course that most employers, like Andrew’s, are keen to support employees when they’re facing financial difficulty – it’s just that they often don’t know how. For employees who have access to an EAP, debt advice is one of the most widely used and valued elements on offer, but there’s still a level of confusion amongst employers regarding the choices available to their staff, and in particular, the legislation surrounding debt advice.

Referral to a provider of free debt management support is the recommended option – but selection of a reputable provider is a challenge in itself; not all offer holistic debt advice, and with it, a commitment to reaching the best outcome for each client’s individual circumstances.

In order to help employees make the best decision on their debt situation, the following questions should be asked of any prospective debt management partner:

a. What is the cost of debt provision to the end client?
b. What is the full range of solutions offered by your organisation? How many are outsourced to partners?
c. What other accreditations do you hold? For example the Quality Standards against the Money Advice Service (MAS) Quality Frameworks for Organisations and Individuals?
d. What are your NPS results around client satisfaction?
e. How do you demonstrate that you treat customers fairly? What is your vulnerable client policy?
f. Do you offer dedicated support for businesses and employers?

For more on the impact of debt on the individual, download our latest whitepaper, Understanding attitudes to debt management.

If you would like to help us with our ongoing research into the impact of debt on employers and employees please get in touch with Deborah Burns at PayPlan at deborah.burns@payplan.com

*This article first appeared in the EAPA Newsletter

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