Category: Employee Benefit

Why Savings Through Payroll Deductions Benefits Employers and Employees

Wages are not rising as fast as living expenses. Growth is slow, and companies are, understandably, hesitant to increase payroll costs. At the same time, employees – consumers – are borrowing more than ever and savings are at a record low.

This isn’t some scene setting exercise for an article in The Economist. Unfortunately, this is the economic reality of Brexit Britain.

Retailers need consumers to keep spending, So do service companies and house builders. Banks are keen they keep spending too, but all of this means it’s easier to borrow money than save.

At the same time, the cost of living – inflation – keeps increasing, up 2.7% in May 2017 – from 2.6% in April, according to The Consumer Prices Index (CPIH), which can’t keep pace with salary increases. Again, forcing consumers to borrow or dip into savings when costs increase or they need to spend more.

With the Summer behind us and Christmas on the horizon, most parents will be feeling an acute pain in the wallet or when the next credit card statement hits.

Savings Recommendations vs Reality

Debt charity, StepChange, recommend most people have at least £1000 set aside in savings. For one in four families in the UK, those that earn less than £1,500 per month (after tax), that simply isn’t realistic or practical. In reality, savings amongst low earners is usually around £95 – an amount that can be easily wiped out when an unexpected bill hits or one month is more expensive than another, such as during the Summer or Christmas. Even that £1000 figure is too high for 70% of adults in the UK.

Saving money is not easy for employees who live paycheque to paycheque.

For most families, even those with two paycheques and working tax credits or another government benefit, getting to that £1000 in savings can be a struggle. Once money comes in, it’s usually allocated to something – mortgage/rent, bills, food shops, kids, everyday money and the occasional treat. Savings is a nice to have, but when credit is cheap and easy to access, not a must-have, at least not every month.

An alternative: A benefit employers can offer employees?

Companies can offer staff an alternative solution.

An employee benefit Savings account, with the amount an employee wants to save automatically deducted from salary payments. Instead of staff struggling to find money to put aside after they’ve been paid, with automatic deductions before the funds hit their bank accounts, they can adjust personal budgets whilst knowing a savings pot exists they can tap into when needed, making it far easier to start saving.

Every month, your team could have money going into savings accounts, putting aside a little extra that grows with dividends, from our Credit Union partners. At the same time, if any of your team need to borrow from a credit union, the interest they pay goes back into the pot that pays out dividends to themselves and everyone else with a savings account.

Similar to automatic enrolment, except this is a voluntary scheme and one that employers don’t need to make contributions towards. Staff control their savings, including withdrawals anytime they need.

Not only will employees gradually build up savings, but for employers, you can rest easy knowing:

  • Workplace stress levels would reduce. Money is one of the main reasons behind absenteeism, stress-related illnesses, poor engagement at work and staff looking for new jobs.
  • Mental health at work will improve. Knowing that staff have savings, money in the bank will reduce the impact of stress, making your team more engaged, focused and able to hit targets.
  • As a workplace benefit, savings accounts are one of the most effective, practical, financial benefits you can offer that doesn’t cost the company money. Now is the perfect time to introduce workplace savings accounts as an employee benefit.

As an employer, you can do something about these issues (whilst also ensuring your staff are more productive and engaged) – thanks to FairQuid Credit Union savings accounts. Best of all, these won’t cost your business a penny. Find out more today.

Working But Checked Out: Why Absenteeism Does Less Damage

Businesses struggle when staff are present but really should be at home. Staff also make more mistakes and potentially endanger themselves and others, including customers. “Presenteeism” is when staff are present, but mentally – or physically, due to ill health, stress or exhaustion – are checked out.

Low efficiency is one of the prime reasons behind the UK economy encountering slower rates of growth and development, contrasted with other G8 nations. Presenteeism is one of the causes for this, as indicated by Virgin Pulse Global Challenge, benchmarked against the 2015 World Health Organization ‘Wellbeing and Workplace Performance’ Questionnaire (WHO-HPQ).

On average, employees underperform for at least 10 days every year – about 6 hours every month, as a result of poor health, tiredness and stress. Assuming you employ hundred staff (25 and over, 7.5 hours per day), at the National Living Wage rate – £7.50 per hour – over the course of one year, this lost productivity would cost your business £56,250.00. Stress and presenteeism cost everyone money.

How do we fix this problem?

Focusing on “workplace culture” usually means throwing “perks” at your employees, such as the option to wear more casual clothes, free breakfast, free food, and other inexpensive “benefits.” These might be appealing in the short run , but research suggests that employees focus more on their stipend and other cash-equivalent benefits, such as car allowance and bonuses.

Most people work for a paycheque. It stands to reason that money matters more than intangible and inexpensive “perks”, and money is one of the main causes of workplace stress and therefore, presenteeism. Worrying about money also contributes to staff taking time off due to poor health, which means some of the median cost of absenteeism – £455 per employee, per year – is a result of personal money worries.

How to Solve Presenteeism?

If perks aren’t the answer, what is?

Employees need to know that you have a solution if they are worried about money. Not every employer can raise salaries quickly, or give out loans, or directly step in when staff are struggling. Nor is it your role as an employer to do that. Not every practical financial workplace benefit needs to come from your HR budget.

Providing practical support, such as employee benefit credit union accounts, is far cheaper – free for businesses, in the case of FairQuid – than watching staff struggle, lowering productivity and even jumping ship. Both stress-based absenteeism and presenteeism are preventable.

As an employer, you can do something about these issues (whilst also ensuring your staff are more productive and engaged) – thanks to FairQuid Credit Union financial wellbeing solutions. Best of all, these won’t cost your business a penny. Find out more today.

Sources:

https://globalchallenge.virginpulse.com/blog/the-cost-of-presenteeismhttp://ehstoday.com/safety-leadership/presenteeism-costs-business-10-times-more-absenteeism

High Rents Negatively Impacting Recruitment and Retention

Living in London is always going to cost more than anywhere else in the country. Capital cities attract more people, more opportunities and, therefore, are more expensive places to live, travel around and enjoy.

But in the last decade, many people are starting to question whether the cost of living in big cities, is simply too high?

London is Europe’s largest metropolis, responsible for 22% of the British economy, with employees in and around the capital paid 29% more than the rest of the country. And yet, the cost of renting and buying a house is prohibitively expensive compared to anywhere else in the UK. Although other large cities, such as Liverpool and Manchester, are rapidly creeping up in price too, partly in response to the rising costs of living in London as people move away to previously cheaper areas.

Mind the Gap

According to Zoopla, the average cost of renting a one bed flat is £1,690 a month, with rent absorbing at least 52% of pre-tax earnings. Other cities, such as Liverpool and Manchester are also more expensive than the rest of the country, with rent higher in areas near major commuter routes, such as Merseyrail in Liverpool. Manchester – which some are now calling the ‘London of the North’ is witnessing London-style price rises for property, with the city experiencing a 20% increase in recent years.

These high costs are even worse for younger employees and graduates, often forced to live in cheaper accommodation, sharing with several others; with them at risk of falling prey to slum landlords and those willing to exploit desperation. Some landlords charge around £500 for beds in kitchens, living rooms, even cupboards and sheds.

House prices are also a lot cheaper, with the gap between London and the rest of the country at £300,000, according to recent figures. In 20 years, property prices have gone up 450% – on average – with Westminster and Hackney increasing around 700% since 1996. It is no surprise that there are now more renters than owner occupiers in the capital.

How High Rental & House Prices Are Impacting Employers

According to employer data from Grant Thornton, the accountant, seven of ten are worried about the cost of rent and housing preventing them from attracting the talent they need. People will always come to big cities for opportunities and advance their career, but if the cost of living is excessive, graduates and younger staff – and anyone without money in the family or substantial savings – may look elsewhere.

Some companies, including KPMG and Deloitte – both big four accounting firms – are now providing accommodation for graduate employees.

Deloitte provides a campus atmosphere, with room prices between £180 and £220, after-work activities organised and travel is only 30 minutes to the office. Far better than staff commuting from outside London, taking multiple trains or buses, or paying £700 for a living in a shed someone’s garden. KPMG makes introductions to private banks, making mortgages far more affordable with lower rates.

Unfortunately, not all organisations can afford to subsidise accommodation or make introductions to private banks to guarantee favourable rates. Even when staff are paid well, saving for a deposit and one or more months rent in advance is expensive. When rents are higher, so are the other associated costs. Buying is even more expensive and, therefore, unrealistic. Staff living in cold and uncomfortable accommodation might stay in the office longer if only to stay warm, which negatively impacts productivity.

One way to support staff in large cities, if you don’t have the resources of a big four firm, is to offer employee benefit loans. It won’t cost you anything, but through credit unions, your team can access loans that would make a deposit more affordable. Make city living more affordable for your staff. Our employee benefit loans and savings accounts, provided by ethical credit unions, are the answer. Find out more.

Sick of Walking a Credit Card Tightrope?

More than 5 million British people have credit card debt that they won’t clear in full for ten years. Some consumers are paying £2.50 for every £1.00 borrowed, which is concerning enough that the Financial Conduct Authority (FCA) is going to make banks take action.

Credit cards are everywhere. In the UK, we are top of global league tables for credit card ownership, according to Kantar Media TGI research, with 73% of the population owning at least one credit card. Sixty percent of people pay the balance in full every month, with average credit card users only accessing 7% of the available funds. Some even play one card off against another, making more money than they pay in charges.

However, not everyone has the funds or ready access to credit facilities to juggle cards and pay balances every month. But that hasn’t stopped credit card companies targeting people – even those who can’t afford it – with offers to transfer a balance to a card with 0% interest.

With average household debt around £13,000, we have to wonder if the financial sector is once again following a dangerous and irresponsible path? What about consumers: Are people aware that alternative options exist?

Making Sense of 0% Balance Transfer Offers

Credit cards are useful when they can be paid off quickly, or when you are only using them for small purchases. But for the 3.3 million people paying more in interest than the outstanding balance, banks are earning a considerable profit from those customers. Hence FCA concern; although, action to help them may not come into force until 2018.

We need to remember that banks can’t stop people from spending. All they can do is offer advice, guidance and ensure customers understand their options. It could be said that many are failing in this area, especially when offering someone a 0% credit card balance transfer.

Offering a customer a new credit card, with a long zero-interest rate period (up to 40 months, or more) sounds like a great deal. Transfer fees are often 3.9% or less, with some free or only 1%, which is usually far less than one month’s worth of interest.

Providing someone can afford to pay the debt in full they are getting a bargain, but for many who can’t afford this, they are effectively being tricked into prolonging their debt cycle. Applicants should check they can afford the deal first, with affordability calculators on most comparison websites. Credit score tools, such as ClearScore, will also show whether you are eligible for an offer, which is worth checking, since once a credit check is done it leaves an imprint on your file, thereby reducing your score.

Not only that, but not everyone who is eligible gets a great deal. About half are offered a higher transfer fee with a shorter zero-percent interest timescale. Not everyone who gets these offers is eligible, which means applying leaves a negative impression on your credit file. The FCA has also found that 20% of people on zero-percent deal cards did not expect to pay interest on a new purchase. A classic bait and switch, with banks concealing information they ought to make clear to applicants.

A Better Alternative?

Transferring debt from one card to another is fraught with risks. Especially if you are worried about your credit score. Loans from banks are harder to get than credit cards. Thankfully there is an alternative. With FairQuid, you can take out an affordable loan and consolidate credit cards and any other debts.

We only work with ethical lenders and credit unions, and they use a broader set of criteria to assess a loan applicant, including your salary and number of years with your employer. Minimum eligibility means at least one year with your current employer.

Want a solution this year? Debts you want to consolidate? Or are you looking for an easy way to start saving?

FairQuid is here to help. Our loans have already made debts more affordable for hundreds of people across the UK who want to reduce their debts and start saving. Fill out the form on this page so you can ask your employer to offer this as a completely free benefit to all staff.

Living Wage & Downsizing: Fears That Keep Employees Awake At Night

In some sectors – retail, hospitality, admin and support (customer service roles) – employees often live with a fear they aren’t as valuable as more skilled workers. Changes, such as the National Living Wage – now at £7.50 for those over 25 – can cause stress and uncertainty.

As much as a pay rise is welcomed, there is always a justifiable fear that companies will need to reduce staff levels to pay more to those they can afford.

The John Lewis Partnership (JLP), owners of the upmarket supermarket chain, Waitrose, and department store, John Lewis, was one of the first companies to report a 17.4% pre-tax drop in profits as a result of a higher wage bill. The Telegraph reported that this wage bill could lead to them “employ[ing] fewer staff over time.”

The Real Risks of Downsizing

National Living Wage requirements mean that it cost JLP an extra £3 million in wages. It could cost more in the next tax year (2017-18), with the government aiming for National Living Wage to hit £9 for those over 25 in 2020.

Other retailers, pub and restaurant chains, coffee shops and hospitality groups also face rising wage costs, which are forcing some to reconsider how many staff they employ. “The British Retail Consortium has estimated that the additional cost to retailers will be between 1-3 billion pounds annually by 2020”, according to a Reuters report on this issue.

Analysts expect certain retailers, including Next, Sports Direct and Poundland – all subject to higher margin pressures than competitors – “could be hit particularly hard.” Store closures are expected, especially with 60% of retail leases coming up for renewal in the next five years. More customers are buying online, which could encourage retailers to downsize store footprints across the country.

Argos (now owned by Sainsbury’s), Debenhams and Tesco are also contemplating downsizing, partly in response to higher wage bills and other costs, which inevitably will result in some staff – potentially thousands – losing their jobs over the next few years.

The hospitality sector is set to experience the largest National Living-induced wage bill increase, of 3.4%. Companies with low prices and low margins will suffer the most, which includes JD Wetherspoon, Costa (and other Whitbread PLC brands), and other pub groups, including Mitchells & Butler, Adnams and Punch Taverns. Wetherspoon’s is expected to reduce earnings before interest and tax (EBIT) 38%, as a consequence of wages rising 10% across the chain.

Good news for employees that receive higher paychecks. Bad news for those companies can no longer afford to employ.

What Can Businesses Do?

Assuming you are affected in some way – that you also need to pay staff more since National Living Wage was implemented – you will probably already know how much more higher wages are going to cost your business. Hopefully, you can absorb these extra costs over the next few years without reducing headcount.

Sustainable growth is the only long-term way to ensure you can employ everyone and pay competitive wages that ensure you can recruit the best talent for your business. Periodically review business operations, to make sure everyone is working in a role that generates maximum value.

When employees are worried about losing their jobs, they look elsewhere, and top performers can jump ship more easily. They have skills your competitors want and need. Consequently, companies are left with mid-level and poor performers, thereby dragging down performance and productivity, or forcing managers to let them go and start hiring again for people capable of hitting KPIs. No one comes out a winner in this scenario. Hiring new staff costs more money than reassuring those who were performing well, but decided to leave as a result of a fear of downsizing.

Providing reassurance in the form of a positive action, such as employee benefit loans and savings accounts, is far cheaper – free for businesses, in the case of FairQuid – than watching your best staff leave and trying to replace them.

With heightened fears of redundancies across sectors where people aren’t paid high salaries, carrying debts around and not having any savings only makes these stresses worse. As an employer, you can do something about these issues (whilst also ensuring your staff are more productive and engaged) – thanks to employee benefit loans. Best of all, these won’t cost your business a penny. Find out more today.

Sources:

National Minimum & Living Wages: https://www.gov.uk/national-minimum-wage-rates
http://uk.reuters.com/article/uk-britain-wages-stocks-idUKKCN0WY4UE
http://www.telegraph.co.uk/business/2016/09/15/john-lewis-partnership-profits-slide-on-higher-wage-bill/

Why is British Productivity So Low: What Can Be Done?

Productivity may not sound like an election issue, but in reality, this is something the government and businesses have been wrestling with for some time. British economic output, our levels of productivity, are too low.

As a country, we are an advanced, complex, mature economy. We are innovative. Our products and services are bought across the world. However, when it comes to productivity – a way of measuring the “output per unit of input, measured per worker or by the number of hours worked,” according to economic correspondents.

Simply put, productivity is a way of showing how much money we make, as a nation, after weighing everything that goes into making those products and services. Economists include everything we produce in these figures, from accountancy and financial services to cars, wind turbines, chocolate and trains.

Mind the Gap

Compared to other advanced economies, our productivity is low. We are 30% behind the US.

Since the 1990s, the Office for National Statistics (ONS) has published an international comparison table of productivity. Between the UK and other G7 countries (the US, Japan, Germany, France, Italy and Canada), there was a 9% gap, which reduced to 4% in 2007. However, since the recession, that has increased again to 18% compared to other G7 countries.

However, within the UK economy, there are enormous gaps, between high-performance businesses and so-called “zombies”, and between different regions. London is 60% more productive than Northern Ireland, which is the least productive region of the country.

OECD research notes that fast-growing companies are more productive than ever, but there are more “zombies” – businesses that are absorbing talent and capital better used elsewhere. According to the Financial Times, this indicates that “a slowdown in the diffusion of know-how and slower elimination of the weakest competitors”, is causing a drag on the country’s economy.

What is the Solution?

Productivity affects everyone. Some areas, such as the City of London (Square Mile) and Aberdeen, home to the UK oil and gas sector, have a much higher Gross Value Added (GVA) than others. Sectors, where margins are higher, will generate larger profits (for owners and shareholders) and higher salaries and bonuses for workers, pushing up productivity.

Infrastructure also plays an important role in the productivity puzzle. Major civil projects, such as Crossrail, the Heathrow expansion, Transport for North (created out of the Northern Powerhouse initiative) and HS2, are all expected to improve economic output and, therefore, productivity. Broadband upgrades and other initiatives will have a similar positive impact.

In November 2016, Chancellor Phillip Hammond announced a national productivity investment fund of £23 billion, for innovation and infrastructure over the next five years. Expect productivity to be mentioned in the run up to the snap election in June 2017.

Businesses are also keen to improve productivity. Over the last decade, many companies have bought and implemented software and other technology solutions as a way of improving processes and producing more in the same amount of time. However, Mario Draghi, the European Central Bank’s president, has noted that too many “European companies were [still] failing to incorporate them into their operations.”

Technology is not the only solution. Financial worries – either from long-term debts or short-term emergencies – reduces productivity, since it reduces employee morale, causing absences, sick days and outward signs of stress, such as tiredness, irritability and accidents.

We also need to remember that productivity is more than a statistical breakdown of how hard we all work. How much computers and machines produce, how we are doing compared to other economically advanced countries. It is an outward sign of human satisfaction. Happier employees are more productive. Knowledge economy workers need to mentally perform at a high level, consistently, which means stress and anxiety – caused by debt, a lack of savings or retirement funds – has a negative impact on productivity, engagement at work and happiness.

Make it easier for your staff to get their finances under control. Offer them employee benefit loans, combined with a saving account. Give employees the option of taking a loan connected to their employment – contingent on years of service and performance – with repayments funded directly from their salaries. Credit ratings are still important, but finally, there is a way to ensure past financial performance isn’t the only criteria to judge future stability.

Employee benefit loans give staff with a way to consolidate debts and start putting money aside in that rainy day fund. Now that is an employee benefit your staff can take to the bank. Find out more today.

Sources:

https://www.theguardian.com/business/2016/dec/25/what-is-productivity-why-uk-poorhttps://www.theguardian.com/business/2016/nov/24/why-is-uks-productivity-still-behind-that-of-other-major-economieshttps://www.ft.com/content/ac05863e-e304-11e6-9645-c9357a75844ahttps://www.ecb.europa.eu/press/key/date/2017/html/sp170313_1.en.html

Why Credit Unions Are The Future of Employee Financial Wellbeing

Consumers lost confidence in mainstream banks as a result of the recession. Mortgage foreclosures, PPI, tighter lending criteria and rejected loan applications crippled millions of families and businesses when they most needed help.

At the same time, governments in the UK, US and Europe were bailing out banks to the tune of several hundred billion pounds. Financial executives were walking away with six and seven-figure golden parachutes when customers were having homes repossessed. It wasn’t a good time to be in the financial services sector, and even now, we are living with the repercussions of that economic collapse. Media stories of massive RBS losses still stir up old resentments.

Banks have more competition. Customers expect more from financial providers; they expect them to make smarter, more ethical, choices. Credit Unions, now numbering 500 across the country, with over 1.6 million members, are a group of competitors that have benefited from a public unwilling to put all of their money and trust back into banks. Credit unions are more popular in other countries, with over 40% of US consumers a member of a credit union. In the UK, that figure is around 4%.

Most credit unions are considerably smaller than banks. It makes it difficult for them to make potential members aware of them. Employers could step in with a solution that helps staff and reduces stress-related absence and staff turnover, with support from credit unions.

How Credit Unions Can Solve Absence & Turnover Problems

Debt and unexpected bills reduce employee performance. Stress increases staff absence, even turnover when they are worried enough about money to look for another job.

With average household debt around £13,000, we can’t assume that banks will lend more money if an employee wants to consolidate debts, or they have an unexpected bill, and we can’t even assume that those on higher salaries save money since savings rates are so low in the UK. In case of an emergency, people are as likely to turn to payday lenders and credit cards than savings.

Credit unions have a better solution, which employers can help their staff find, through employee-benefit loans and savings accounts. Here are a few reasons why credit unions can provide an advantage for employer’s looking to reduce stress, absence and turnover amongst staff, whilst also improving long-term financial wellbeing.

1. Loans based on years in service

Credit union members can only get loans when they have been a member for a certain amount of time. When it comes to employee-benefit loans through FairQuid, credit unions need a minimum of one year’s service with an employer. This way, you can reward service with the option of loans and savings accounts from an ethical financial provider they would not normally be able to access straight away.

2. Salary and employment history influence the loan amount

Mainstream lenders don’t take this as much into consideration as credit unions that offer employee-benefit loans. The longer you work for a company, and the more you earn, the more you can borrow; generally up to £7,500.

Banks put far more weight on credit scores, which means any bad history will increase your interest rates or make an employee ineligible for a loan, even if they can afford it. That doesn’t help people who want to consolidate debts or pay for an unexpected bill, which in turn means they could take time off due to stress, suffer low productivity (financial stress can cause your IQ to drop 13 points) or start looking for another job. Consequently, productivity suffers, all as a result of something outside your immediate control.

3. Manageable affordability and savings

Anyone who gets a loan from a credit union becomes a member, which means they also need to start saving – as a result of automatic enrolment in the Membership. Since both the loan and saving amount are taken at source – the same as Tax & NI – the employee doesn’t see the money come into their account and then have to pay it out.

In effect, they don’t miss what they don’t have. This way, they adjust to the slightly lower Net salary, whilst knowing that a rainy day fund is building up and their debts are decreasing.

4. Hassle free loan applications

Employee-benefit loans also make applying for a loan far easier, since the bulk of the paperwork they need is verified through the employer. Credit unions can process applications faster. Staff who are stressing about money can have a solution that eliminates these worries quickly so that everyone can get back to work.

Need a solution that makes a real difference to your staff, without costing your organisation a penny? Debt is everywhere, but it doesn’t have to drag down your productivity. Our employee benefit loans and savings accounts, provided by ethical credit unions, are the answer. Find out more:

Lending Money to Staff: Pros and Cons?

We aren’t born worrying about money, as Yorkshire Bank likes to remind anyone who uses their cash machines.

And yet, for the majority of adults in the UK, money worries cloud our waking thoughts – and troubled nights sleep – more than we realise. Old debts, credit cards, overdrafts, store cards, consumer credit purchases – such as cars and sofas – can make it difficult to save for a rainy day, for a holiday, or for buying a house. Most of us work to live, making money a recurring source of worry.

It is worse when you are in debt, which most households are, to the tune of £12,887, according to recent figures from the Office for National Statistics (ONS), on average, which includes student loans. Mortgages aren’t included in that figure.

Sudden unexpected costs can throw a household budget into turmoil. From new tires to a broken boiler (1 in 5 break every year), we can’t always control how we spend our money. It would be great if we could, but life can get in the way.

When people don’t have a rainy day fund – which is easier said than done – it can force them into a limited range of options, especially if poor credit scores and other lines of credit prevent them from borrowing more from banks and building societies. Under these circumstances, some will turn to an employer, especially if there is a history of lending money to staff in need.

Should You Lend Money to Staff?

There are a few different ways companies lend money to staff. In London, interest-free annual TfL travel passes are a great way for employees to save money on tubes, trains and buses, with the payments deducted monthly from salaries. For this article, we are talking about when an employer transfers money to an employee as a loan.

Although there are risks, there are a couple of benefits to lending money to employees.

Loans encourage loyalty. Unlike loans from banks, credit unions, or even payday lenders, this money is directly tied to an employer; therefore, an employee is more likely to feel a stronger sense of loyalty to the company. Taking money worries off their mind means they can focus on work, which in turn means they will be more productive, thereby creating more value for your company.

However, there are downsides, which businesses should consider before lending money.

#1: Potential Consumer Credit Implications

Loans to employees can become voidable if there is no 14 day cooling off period given, no annual statement of accounts, and if there are any restrictions on how the funds are used.

The Consumer Credit Act casts a wider net than many employers probably realise, with fines of up to £5,000 and, potentially, two years in prison, if a company is caught issuing consumer credit without a license. Without realising it, companies that lend money to staff could be in breach of the Act.

#2: Discrimination Concerns

From a financial perspective, some employees are a lower risk than others. Unfortunately, lending to one and not the other can cause tension, bad feelings, and potentially, charges of discrimination being levelled against a company.

#3: Loans as a Source of Stress, Financial Dependence

Loans aren’t always a one-off. When the same staff are coming back for loans, emergency advances and quick cash injections, it raises the question as to whether you are doing more harm than good. Clearly, in these cases, they have become financially dependent on the extra money and are living beyond their means.

In the long-term, this is an unhealthy cycle that needs to be broken. Plus, this places an undue financial strain on a business when it is constantly acting as a credit line to employees. There is an alternative solution: Employee benefit loans, combined with a saving account.

Give employees the option of taking a loan connected to their employment – contingent on years of service and performance – with repayments funded directly from their salaries. Credit ratings are still important, but finally, there is a way to ensure past financial performance isn’t the only criteria to judge future stability.

Employee benefit loans take the strain and financial risk off employers, whilst providing staff with a way to consolidate debts and start putting money aside in that rainy day fund. Now that is an employee benefit your staff can take to the bank. Find out more today.

Sources:

> http://www.macfarlanes.com/media/1731/loans-to-employees-consumer-credit-act-implications-ric-march-12.pdf
> http://www.hrpayrollsystems.net/are-employee-loans-a-good-idea/
> http://www.personneltoday.com/hr/how-to-offer-loans-to-employees/