Helping Employees Manage Their Finances
16 August 2018

Employee debt – financial literacy – learning and skills

Figures from The Money Charity paint a serious picture of debt in the UK. Citizens Advice Bureaux in England and Wales dealt with 4,475 new debt problems every day during January 2017. The average total debt per household – including mortgages – is £58k. Per adult in the UK that’s an average debt of £30,455– around 114% of average earnings.
Have you noticed any of your employees continually carrying debt on credit cards, depending on overdrafts or lines of credit to make ends meet, using one form of credit to pay for another, hiding spending from a partner or using credit to pay for essential living costs? These are all early indicators that someone may be experiencing financial problems. Financial difficulties are often taboo; those experiencing debt often don’t want to seek help because they’re ashamed.

Over the last few months I have found myself repeatedly advising clients to offer help to employees with some form of financial counselling or education.
Money problems can arise for all sorts of reasons – for examples, because of lack of work or unemployment, injury or illness, separation or divorce, student loan debt or high housing costs. But there are also those who simply spend too much.

Many adults are simply not financially literate and they are spending far more than they earn, never mind putting money aside for a rainy day.

Recently I was talking to an employee who already earns a good salary. The company had won a big contract recently so she’d gone out and bought a new car somehow assuming that new contract would immediately and directly translate into pay increase. But no one had said she would be getting a bonus or pay increase and now she’s in financial difficulties (again). She already has heavy debt and has borrowed money from the company. She can’t afford the repayments on the car and has asked for a pay increase to pay for the car...

This type of financial insanity is incredibly common. Whether it’s because we have been told “We’re worth it” by L’Oréal so many times that we believe it (it’s advertising, chaps, not a real life instruction!) or because we live in Amazon Prime world and don’t want to wait for and plan for anything, I don’t know. But financial illiteracy is not cute or healthy and debt is terrifying for those who stagger into it. It’s sensible for employers to try and help our staff, not least because if they are responsible for a departmental budget they have to have the skills to make it work properly.

Employees with money problems are more likely to steal of act fraudulently if they’re in debt. Even if they don’t steal, they can become very depressed and anxious. Financial education and counselling can help address such problems at an early stage.

Many employers don’t have the resources and skills to provide financial education but there are a number of free services available to help provide support. The Money Advice Service, Citizens Advice and Age UK provide guidance and simple and easy to use online financial tools. Martin Lewis’ website (moneysaving also has plenty of useful advice.

What you can do to help employee to be able to manage their finances responsibly.

  • If your company provides an employee assistance programme, ensure it is able to support employees with personal financial matters.
  • Make details of debt counselling service known to employees.
  • Know which reputable sources of assistance are available that you can refer to employees. Make a referral list available centrally for everyone to access confidentially.
  • Help employee’s efforts to live within their means, on a budget and without credit.

The advice given by Dickens’ Mr Micawber in Victorian England is still true today: "Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

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Although every effort has been made to ensure the accuracy of the information contained in this blog, nothing herein should be construed as giving advice and no responsibility will be taken for inaccuracies or errors.

Copyright © 2021 all rights reserved. You may copy or distribute this blog as long as this copyright notice and full information about contacting the author are attached. The author is Kate Russell of Russell HR Consulting Ltd.