Employees’ financial ill health takes its toll at work

Employers are stepping in to help staff escape from debt
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In January, when 29-year-old Matthew Dreiling joined the US arm of professional services group PwC as an associate, he was delighted but a little anxious. His starting salary was high, but not enough to stop him fretting about his $90,000 of student loans. “I would revisit this topic pretty constantly in my mind, and analyse it, and try and figure out how I was going to pay it off,” he says. “I wouldn’t say it was a health concern, but it was definitely a worry.”

He was lucky. Last year the US division of PwC became one of the first of a growing number of companies that help pay staffers’ education loans. Dreiling gets $1,200 worth of such assistance a year. “That goes a long way to covering the interest and, over time, helps reduce the burden of that debt,” he explains.

As consumer indebtedness rises, employers are becoming aware of the impact of financial stress on employees’ productivity and mental health, and how to do something about it.

“This is the hot new thing among HR and wellbeing professionals,” says Sally Purbrick, head of reward at Anglian Water, a British utility company that helps employees to save and to consolidate their loans. In agreement is Jennifer Hanson, head of associate experience and benefits at Fidelity Investments, another large employer to offer student loan reimbursements in the US. “After we launched [in January 2016] we had phone calls with about 100 other employers wanting to know about what we were doing. Now it is popping up in benefit programmes all over the place.”

Employers’ focus on debt is growing. “One in six Britons is over-indebted and 16.8m people in the UK do not have more than £100 put aside,” says Katie Evans, head of research at the Money and Mental Health Policy Institute, a British charity. In the US, household debt has surpassed its pre-crisis peak as rates of arrears on student and car loans also rise.

48% of employees indicate they have at least some financial concerns and lose an average of 6 days of productive time at work each year

Source: VitalityHealth/Rand Europe; Britain’s Healthiest Workplace

Financial ill health costs companies time and money, survey data show. According to Rand Europe, which surveyed 30,000 Britons this year for the Britain’s Healthiest Workplace project, problem debt directly affects employees’ productivity. “Around half of people we survey say they have financial concerns, and this makes them less productive,” says Marco Hafner, research leader at Rand Europe. “They lose on average six days per year more, in absenteeism and presenteeism, than someone who does not have financial concerns.”

The financially distressed also sleep less and put on weight, says Hafner, who says his findings are controlled for other variables that may affect respondents’ wellbeing, such as childbirth or chronic illness.

More than two-thirds of workers who report financial difficulties show at least one sign of poor mental health, according to the Money and Mental Health Policy Institute. “Our qualitative research shows that financial difficulties can also affect relationships with colleagues, motivation and likelihood of sickness absence,” Evans says. She adds that around half of workers in financial difficulty say they achieve less at work or work less carefully.

Anglian Water’s Purbrick says that while employers are keen to stop such situations developing, large financial services organisations have yet to respond to this need with products and solutions that help staff save or escape problem debt. “There just isn’t a lot in the market,” she says, adding that the bank that runs the Anglian scheme to help employees save part of their salaries was forced to adapt its employee sharesave programme to carry out the function.

For loan consolidation, Anglian is in partnership with Neyber, a British fintech start-up that lends to employees through the payroll, with repayments deducted from salaries. Monica Kalia, Neyber co-founder, says her customers have usually borrowed on credit cards charging around 20 per cent annual interest. Refinancing £10,000 of such debt at Neyber’s mid-rate of 6.9 per cent would save customers £101 a month, she says. Borrowers range from those “just about managing” to the relatively affluent: 5 per cent of those who apply for debt consolidation earn more than £50,000 a year.

PwC’s Dreiling says he is a prime example of “someone who earns a good amount but still has to budget around debt repayments”. However, he says the $1,200 a year from PwC has gone a long way to ease his stress. “It is nice to know I’m not alone in these repayments. It feels more of a manageable burden.” 

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