Debt and Economy Damaging Careers and Earnings of Millennials

Our economy is growing, but that doesn’t mean we have seen the last of the recession. It continues to exert an influence on the prospects and earnings of professionals who started their careers during the recession.

Millennials – those born between 1984 and 2001 (also known as Generation Y) – in the UK ended up with the short end of the financial straw. Around the same time – the early 2000’s – the economy was ballooning into a bubble; Generation Y was being sold the dream of earning a degree and walking into a high-flying graduate job, with signing bonuses, cars, and benefits. Then, in 2008, the recession hit.

Dream jobs for graduates became scarce. Young people, used to their own freedom, were forced to return home. A bleak reality sunk in, with dreams put on hold and a younger generation taking any job they could get, from zero hour retail contracts to low-paying freelance gigs. No one expects to graduate from three years of study with a first or 2:1 only to return home and work at Burger King, but for some, especially those who aren’t from privileged families, that is what happened.

Although the recession is over, it takes millennials even longer to get on the housing ladder. Savings are frighteningly low amongst this generation. And debt is high, thanks to student loans, overdrafts and credit cards. But the recession has had a more subtle, yet ultimately more damaging impact on the career prospects of millennials.

Lower Career Confidence

Millennials are – incorrectly – considered fickle and loyal only to themselves. Partly thanks to social media, the “oversharing” generation appear quick to change partners, university courses and jobs. However, a recent study by the Resolution Foundation has found that workers born in the mid-1980s are half as likely to switch jobs as those born in the previous decade. Only 25 percent of millennial professionals regularly job hop, in stark contrast to one of the career stereotypes of that generation.

Wages are also stagnant for younger generations, making it harder to pay off debts or save for a deposit. Perhaps unsurprisingly, many who weren’t able to find work after graduating went self-employed, which comes with other risks and rewards.

For those in employment, “One of the most striking shifts in the labour market has been young people prioritising job security and opting to stick with their employer rather than move jobs,” said Laura Gardiner, a senior policy analyst at the Resolution Foundation.

Can Employers Support Millennials More?

Through no fault of their own, Gen Y employees entered the labour market at the worst possible moment. For many, this slowed down, derailed or resulted in entirely new career plans and pathways. It also made this generation of professionals more cautious. Consequently, they don’t take as many risks, which is why they place a higher value in job security, skills development and reassurance, in the form of praise and feedback, more than previous generations.

However, with unemployment lower than ever – at 4.8% – we know this situation is already starting to change. Younger workers are eager to get on the property ladder. Perks and benefits are great, but millennials prefer salary increases, bonuses, commission or another form of financial reward. Employers should not depend on loyalty when they are only handing out “soft” incentives, such as training, flexitime and Friday treats, like pizza and cake.

One of the biggest financial challenges for younger workers is debts and savings. Too much of one, not enough of the other. Pizza and cake will not keep staff loyal forever when they need to clear debts and pay deposits. However, you don’t always need to give millennials a raise to solve these issues.

Instead, we can provide long-term debt consolidation and savings accounts from ethical lenders through our platform, making it easy for you to help them repay debt responsibly and save for a brighter future, without costing employers anything. Now that is an employee benefit your staff can take to the bank. Find out more today.

CV Library research:

Impact of Employee Financial Stress on your Bottomline

Employee Stress

Recently came across a well-researched post in America about the impact of employee financial stress and its impact on company’s bottom line in real dollars and cents. You can read the whole post and the sources of data they have researched against these, at the bottom of our post.

The main theme was around an acronym they had created – DEFACE and how it adds real costs to a company’s bottom line. We thought we will follow their lead and see how some of this adds up to a company in the UK of 500 employees and paying (for this post’s sake) a minimum wage of £7.20 an hour.

First, the acronym itself relates to Days available (attendance or lack thereof), Engagement (productive hours at work), Fatigue, Alertness (workplace accidents), Commitment (Staff turnover) and lastly Ethics (correlation between stress and temptation to steal at work).

Days Available: on an average 10 hours per month is lost due to absenteeism, 70% of all job absenteeism is tied to stress-related illnesses, of which the leading cause is financial stress. So if we assumed 7 hours a month due to financial stress, the cost impact is £302,400 per year. This obviously does not look at the opportunity cost to business of missed deadlines on customer orders and production backlog

Engagement: On average, a financially stressed employee will spend 20 hours per month dealing with financial issues at work. 70% of UK workers talk about being affected by financial worries. So if we take that as the staff numbers impacted, the cost impact is £604,800 per year

Fatigue: ‘Present-eeism’ where a worker is physically present but absent due to distractions about financial concerns, steals 6 hours of productivity per month per stressed employee. Applying for the same numbers as Engagement, the cost impact is £181,440 per year

Alertness: About 70% of workplace accidents are stress-related due to the distractions of that stress. The US paper said, “As a result, companies with 1,000 employees see about 23 stress-related accidents per year, costing about $29,000 each.” We checked the UK government’s Health and Safety Executive (HSE) website and see that for the UK the figures are £1.6 million for fatal injury, £7,400 per non-fatal injury. If we only look at non-fatal injury then the cost is £85,100 per year

Commitment: Staff turnover is high amongst financially stressed workers as they are willing to switch for an even small increase in wages. If we looked at the UK average turnover of 19% and studies show that 40% of turnover is stress related, the cost of replacing such employees is £5,000 each. So again the overall cost would be £190,000 per year

Ethics: Financially stressed workers are more tempted to steal from their employer, and in the US 4.2% of employees have been caught doing just that. Since we could not find similar data for the UK and did see that most of these were limited to Retail and Logistics sector (as far as available data we could find), we decided to exclude this from our calculations.

So for the 500 staff company, the overall cost of employee financial distress can be as high as £1,363,740. Now that is a substantial sum of money to be left unplugged from your bottom line.

There is a lot of awareness and emphasis now on Financial Education and Employee Financial wellbeing within the HR practitioners across the UK and this segment of Benefits is growing the fastest by various industry estimates. Though education is a good objective but education alone will not bring about behavioural change.

Companies need to be part of the alternative instead of being on the sidelines. The obligatory saving contribution in addition to loan repayments, is one small feature of FairQuid partner Credit Union loans that not only help employees consolidate their existing high-interest debt (thus saving money in interest costs) but also bring about a behavioural change in savings habit in a way that they have a pool of money saved by the time their debt is paid off. So the next time they need money for an unexpected expense, they don’t think of borrowing as their first option.

For more information on how your company can become a part of the movement, contact us

American source article

HR challenge: Why would your employees be loyal to you when they could get a higher pay somewhere else?

Employee benefits are increasingly popular and we frequently hear about this new high tech start-up that offers unlimited holidays, stock options or discounted travel tickets.
All these perks sound great on paper but do they have a real impact on staff motivation and retention, if your company is not Uber or Virgin and you don’t have a workforce made of 25 year old computer geeks?
In a recent study on employee wellbeing* Barclay’s highlights the employee benefit disconnect where 72% of employers are confident they provide a good benefit package but more than 78% of employees disagree.

Two main factors can account for this strong discrepancy:
1. Chasm between benefits offered and needs of your employees
2. Communication on benefits available to the employees

Chasm between benefits offered and needs of your employees
For your employees to commit to your company goals, and go the extra mile, to make sure that they are achieved, the very first thing that comes to mind is, for you to go the extra mile for them. Get in their shoes and see what challenges they face in their daily lives. Create an ecosystem where they can focus on work and not have others worries occupying their minds. Maybe a good way to evaluate benefit packages could be to go back to basic concepts and compare what needs you’re satisfying on a Maslow Pyramid and where your employees actually stand on this scale.
1. Physiological needs
2. Safety
3. Love/Belonging
4. Esteem
5. Self Actualization
In a developed economy, like UK, one would expect all people to rank high in Maslow hierarchy of needs. While physiological needs are mostly covered, the need for safety (financial) is often not entirely fulfilled. Living in a stable and predictable environment is an essential feature that your employees look for. Several benefits exist and the most famous are healthcare and retirement plans. While these benefits are attractive to 40+ y/o employees, their impact on younger staff is far less significant.

According to Barclay’s Study, 40% of UK citizens have less than one month’s savings and make attractive business for loan sharks (payday lenders and credit card companies). How could your employees be engaged and focus on work when they lose sleep at night, because they don’t know how they are going to pay their bills or fund an unexpected expense? Employees don’t leave their financial issues and stress at the door, when they come to work in the morning.
Salary increases and company lending are not viable options. In a competitive environment a few percent raise in salary has little to no real impact on employee’s well-being but can be enough to wreck an organisation’s finances. That’s when smart benefits come into play; to implement benefits that will be adapted to the specific needs of your employees and sustainable for your company. Employee financial health is probably the most significant area for HR managers to focus on, but there are many more.
HR managers are key to assess what employees need, to deliver their full potential for the greater good of the company. They are also responsible for its successful implementation which can’t happen without a full commitment from the HR team.

Communication of your benefit package
For a benefit package to succeed within the company, HR managers must support it actively. Regardless of whether the benefit package was tailored at the company or purchased from a benefit provider; HRs are the key to massive employee adoption of any benefit package. If HRs don’t actively support and promote it, it will not be successful no matter how good it is for employees. Communication tools exist and can be used to set up active long term promotion campaigns. Some ideas:
– Common advertising: posters, leaflets
– More advanced advertising: company internal meetings, newsletters, visibility on intranet, case studies & employee feedback
– A benefits portal with easy access online 24x7x365

Being seen is not enough. Make sure your benefit package is easily available and enrolment is hassle free and convenient. The interface is key: Thaler and Sunstein showed in Nudge# that the interface determines the behaviour of people. Let me give you a very basic example. At a company/school cafeteria depending on how food items are arranged you can increase or decrease the consumption of any food item up to 25%. This experiment is a good illustration of the Nudge theory. In other words, how you can influence healthy behaviours through the choice interface you’re offering to your population. In the employee benefit area this theory was implemented in the US as suggested by the Save More Tomorrow program where employees monthly retirement savings contribution is automatically raised every time they got a pay raise unless employee logs in and cancels the automatic raise in his monthly salary deduction. In its first implementation, the Save More Tomorrow program helped boost the average participant’s 401(k) savings rate from 3.5% to 13.6% in just 3.5 years. People want to save more but they just don’t have the reflex to do it. Save More Tomorrow nudges them to increase their savings and lets them free to do otherwise if they don’t want to.

As we said retirement plans are good ideas but not enough to retain all workers that might be focusing more on the present rather than on their retirement strategy. In the UK, there is the example of Credit Union^ payroll deduction schemes. They are great opportunities for employees to get back on track with their finances by having access to affordable and healthy lending and a strong incentive to save money every month. However, very few employees join Credit Union payroll schemes because of lack of convenience and user-friendliness: the interface is just not right.
– Credit Unions only lend to members (with at least 3 months or greater membership history) but usually people only think about joining when they need a loan.
– Plus, even if your company has a payroll scheme with the local Credit Union, you still have to mail documents or show up physically at their local office.
– So people end up going online to payday lenders or using credit card debt even if it is more expensive and they can’t afford it, but it is convenient, quick and easy.

WEC Group a Lancashire-based metal fabrication company is one concrete example of how understanding the Nudge effect and optimizing the user interface can dramatically increase employee adoption of a new benefit. WEC had a payroll deduction scheme with Jubilee Tower Credit Union but uptake from employees was not that encouraging. One of the directors, Wayne Wild was challenged with a high staff turnover (>20% p.a.) and was looking for a benefit that would attract and retain talent at WEC. He was convinced that Credit Union membership could be a huge benefit for his employees. He decided to change the way employees accessed Jubilee Tower Credit Union Services and introduced FairQuid Employee Benefit scheme. This innovative idea was a game changer as it made it easy and hassle-free for employees to get the loan they needed at a fair rate of interest. No need to save before they borrow and everything happens online in real time.
1 year after implementation the scheme has achieved its goal of improving staff retention above expectations. Over 130 employees have joined the scheme and staff turnover dropped to 4%, saving the business over £250,000+ in recruitment and associated replacement costs.

“It’s a win-win,” says Wild. “The employer wins by saving on retention and recruitment; staff win with low-cost borrowing. The only thing he changed was the interface and the result was a massive increase in employee participation.

Making a difference to your employees lives is not necessarily about new and quirky benefits, it’s about inspired HR managers caring about the real issues of their people and trying to make a real difference for them. The benefit package per se is not enough and must be integrated with a communication strategy designed to make employees aware of what is available to them and make sure to design a choice architecture that will favour high participation.

Financial Well-being: The last taboo of the workplace? Why organisations cannot afford to ignore the financial health of their employees, Douglas Johnson-Poensgen, Barclay’s 2014
Nudge, Improving decisions about health, wealth and happiness, Thaler & Sustein, Yale University Press, 2008.
A Credit union is a non-for-profit organisation that operates savings and loans account for its members. These organisations are fantastic because they provide loans at a fair rate of interest and all the profits are paid back to the members as dividends every year. Some Credit Unions have ties with local employers that they establish on their own or through FairQuid.