Tag: retention

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.

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

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/

Do Employees Care About Workplace Perks?

With growth at 2% and unemployment at 4.8% in the UK, we might be forgiven for thinking the recession is receding into memory. And it is, for the most part. Except for the impact recent economic history is still having in the workplace.

In the years immediately after the recession – when Europe was wobbling on the brink of another – employees were under pressure to do more with less. Everyone was being asked to do more. Work longer. Work harder. But without annual pay rises and other financial incentives. For several years, belts were tight everywhere, in every sector.

Consequently, many hardworking employees felt undervalued and poorly rewarded. Business owners and HR managers needed to do something to reward them for working so hard, without resorting to pay rises or bonuses. Around the same time, ideas started filtering through from venture capital-backed startups in California. Startups are competing against the likes of Facebook and Google for staff, which is why many started offering perks and benefits that helped them recruit the talent they need and win some free publicity.

What Kind of Office Perks?

Perks in the office can range from free breakfasts to early finishes on Friday, to an employee bar, drinks fridge, or beer or Prosecco on tap. Pet dogs are becoming a popular choice, for staff, and growing an audience on Instagram. Other offices have beanbags, hammocks, slides, nap rooms, pool tables and Yoga classes.

Unlimited holidays, flexitime and the option to work remotely are also popular choices, especially for fast-growing companies and SMEs.

Employers argue that perks aren’t just useful team incentive and recruitment tools. Perks are also useful for promoting a stronger work/life balance, reducing staff turnover and increasing engagement at work. Free food and drink is one of the easiest to implement, and most popular choices, since it encourages staff to interact more in-person, whilst saving them time and money going out for lunch. We can’t deny that some form of employee incentives – such as pizza or an early finish on Friday – is useful for morale and team communication.

Get the Basics Right

However, it can be easy for an employer to use perks as a way to forget what employees really need to feel valued and stay productive. Long-term loyalty does not come from perks. Salary and financial benefits are vital. Communication – such as feedback and praise – is invaluable. Honestly is essential. Employees don’t like to feel they are at the receiving end of a lie.

Google, known for perks and incentives, investigated their impact in 2012. Oddly enough, “it found that employee morale wasn’t directly linked to Google’s benefits”, according to Reed.

CV Library found that 85% would prefer some form of financial reward, instead of a workplace perk or benefit. With the average household debt in the UK around £13,000, there has never been a better time to offer your team benefits that really matter, which could be anything from a pay rise, to bonuses, to something financial, but cost efficient, such as employee benefit loans and savings accounts.

Giving employees the ability to reduce debts and increase savings, without adding to your payroll costs is a win-win for everyone, especially if you are keen to offer practical support, but need to consider economic factors now that Article 50 has been triggered. Clearly, employees value financial incentives more than gimmicks and “perks”, which means an employer should consider a range of options to deliver these solutions for their team.

We work with ethical financial providers to deliver these solutions to organisations across the UK, costing the employer nothing, whilst ensuring their staff can consolidate debts and start saving. Loans and savings: Reducing one and increasing the other at the same time. Find out more today.

Sources:

Reed: http://news.reed.co.uk/office-perks-have-they-lost-their-pulling-power/
CV Library research: https://www.employeebenefits.co.uk/issues/january-online-2016/85-would-opt-for-a-pay-rise-or-bonus-over-workplace-perks/

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.

Sources:
CIPD: http://www2.cipd.co.uk/pm/peoplemanagement/b/weblog/archive/2017/02/23/job-loyalty-denting-millennials-pay-and-careers-report-finds
CV Library research: https://www.employeebenefits.co.uk/issues/january-online-2016/85-would-opt-for-a-pay-rise-or-bonus-over-workplace-perks/

What To Look Out For When Employees Are Struggling With Debt

Despite Brexit inspired fears of an economic slowdown, the British economy keeps growing, with recent forecasts from the Bank of England, European Commission and IMF reporting positive upgrades for 2017.

Business and consumer confidence remains healthy, even optimistic. Fears of recession are receding in people’s minds, replaced by new fears, such as what chaos US President Donald Trump might unleash on Twitter today. Unemployment is currently at 5.4%, with businesses continuing to recruit new staff, grow and invest. At the same time, consumers are borrowing at a rate we have not seen since 2008.

The most recent figures from the Bank of England show unsecured consumer debt – credit cards, loans, overdrafts, car finance and second mortgages – grew 10.8% in November 2016, totalling £192.2 billion.

Peter Tutton, head of policy at the debt charity, StepChange, pointed out that net lending is growing at rates not seen since 2005. Speaking to The Guardian, he said: “Alarm bells should be ringing.” When student loans are thrown into the mix, average UK household debt reaches £12,887, according to the Office for National Statistics (ONS) and TUC.

Are Consumers Saving?

Confident consumers don’t save, they spend. Historically low-interest rates are also partly to blame. Not only is money cheaper to borrow, but saving it generates miserable returns. When an economy is strong, savings fall. They are currently at 5.6%, according to the latest Bank of England figures from Q3 2016.

According to StepChange, if every household had £1,000 as a rainy day fund – which is less than the three to six months financial experts recommend – it would reduce the risk of 500,000 families falling into short-term ‘problem debt.’ For many households – especially those earning decent money – it is easier to take out another credit card than saving.

When Debt Becomes a Problem

Debt is everywhere. Managers and highly-paid professionals have debt. Business owners can’t assume that their staff aren’t struggling with finances as a consequence of comfortable salaries. Higher pay makes it easier to borrow, which in turn, reduces the desire to save and keep a rein on outgoings. When money is flowing freely, now is the time to get into good savings habits, which is also something employers can encourage.

Employers can’t tell employees what to do with their money, but they do have a duty of care that extends to personal and financial wellbeing. An unexpected expense, changing circumstances – such as divorce or a suddenly unemployed partner – and bills getting out of hand can soon push people into tricky financial circumstances. It can happen to anyone, especially when there is no buffer to cushion the blow.

Watch out for warning signs. Bad and unexpected debt can impact productivity, employee morale, causing absences, sick days and stress. Here are a few things managers and colleagues should look out for:

  • Changed circumstances: especially new expenses or reduced household income (a relationship or marriage breakdown) – not reflected in lifestyle choices. If someone is living the same way – going out and splashing cash around – they could risk getting themselves into unmanageable debt.
  • Exhaustion, irritability and stress: We spend a lot of time with our colleagues. People notice when team members are mentally and physically drained. Bad moods, lack of sleep and exhaustion have many causes, but financial worries are always worth asking about, providing this is done sensitively.
  • Poor diet: Financial anxiety is another reason people comfort eat, sleep less, drink more, and stop taking care of themselves.
  • Anxiety, anger and an inability to concentrate: Everyone reacts to stress differently. Some may withdraw, whereas others get angry, or can’t concentrate at work, which is unsurprising when studies show that worrying about money reduces mental capacity, comparable to losing 13 IQ points.

No one wants employees to suffer without offering some intervention and help. There are several solutions, from training to practical interventions, such as the ethical loans we provide through our platform to savings accounts, which is also something we can offer employees. When it comes to saving, small change soon adds up. Providing any assistance is offered sensitively, and the help is received willingly, an employee can get unexpected costs back under control without extra stress or being forced to pay ridiculously high rates that only make a situation worse.

Sources:

1. The Guardian: https://www.theguardian.com/business/2017/jan/04/uk-credit-cards-borrowing-debt-economic-crash-fears
2. ONC and TUC figures in the BBC: www.bbc.co.uk/news/business-38534238
3. B of E savings figures: www.economicshelp.org/blog/848/economics/savings-ratio-uk/
4. Princeton study on debt and cognitive impact: www.wired.co.uk/article/worrying-about-money-can-lower-your-iq

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

Brexit: Implications for HR

Leaving the European Union is a substantial step for any member state to take. The decision is in many ways a social, cultural and political one, but it is also one which carries economic implications. The United Kingdom’s decision to leave the European Union, or ‘Brexit’, has consumed much debate. The magnitude of the economic costs and benefits of Brexit cannot be known with certainty before the event. The unexpected result of the vote and its ensuing fallout has created an atmosphere of instability and ambiguity, which never bodes well for the economic climate.

As per the data from Adzuna, a job-search website, their count of new job ads put up was 29,000 compared to 39,000 (This is week on week number), a worryingly large fall of 26%. The count of new ads over the past seven days is 570,000, compared to 615,000 the week before (a 6% fall). Employers, it seems, are already less keen on hiring. Many companies opt for stack ranking (also known as “20-70-10” system) of employees in this situation, which creates job insecurity and demotivation among the workers. The workers are divided into “A” (20%), “B” (70%) and “C” (10%) players, where A being the top performer, B the vital majority and C being the poor performers. The “C” workers are let go as management feels this way they can kill two birds with one stone – 1. Reduce workforce costs ahead of tough time, 2. Avoid letting go of the vital majority for some time. However as the workers are not told their ranking, it creates a sense of job insecurity among “A” and “B” players as well, since they feel they would be the ones in the next round.

As a result, “A” performers start leaving as they are in a position to secure alternative jobs even in a tough economy. So the business is in some ways stuck with “B” players as they do not find jobs as easily in the tough market but with the insecurity and de-motivation their productivity drops and can very quickly become “C” players. So very easily the companies can be left with “C” players that they were trying to reduce to begin with.

When you force employees to fit into a pre-determined ranking system, you do three things:

1) Incorrectly evaluate people’s performance, by forcing line managers to fit their teams in the 20-70-10 bell curve model

2) Make everyone feel like a number, and

3) Create insecurity and dissatisfaction when performing employees fear that they’ll be fired due to the forced system.

This flux and uncertainty of Brexit is an opportunity for the HR professionals to not be reactive but be proactive. As an HR professional if you are proactive then you not only prevent “A’s” from leaving but also motivate “B’s” to become “A” players. You should consider that people have responsibilities toward their families and they have bills to pay every month. The best reassurance and benefit one can provide in these tough times is the freedom from financial distress.

It is time for companies to start focusing some of their HR efforts on tackling financial stress. With the new breed of employee benefit offering money management tools; it’s now possible to do this effectively and in a targeted manner. Employers should tie up with financial employee benefit providers like FairQuid that provides access to savings and affordable loans through local Credit Union partners. The employees irrespective of their salary scale just have to fill in the loan application form online from the convenience of their office desktops. The saving contributions and repayments are automated through payroll deductions; therefore they don’t have to worry about missed repayments. Since Credit Unions are providing this facility based on their employment and length of service with the company, it encourages the employees to stay with the company till the loan is repaid and thus helps directly reduce the turnover rate in the short term. Thus FairQuid, through its Credit Union partners, provides financial freedom to one and all irrespective of their income.

Giving employees the tools for financial resilience can break the needless spiral of anxiety and stress. This is crucial as far as productivity is concerned, where the impact of financial stress on the workplace can be dramatic.