Employee finances: House of Lords report update
Monica Kalia, April 11, 2017
House of Lords Financial Exclusion Select Committee report finds employers can play an important role on financial exclusion
That employees feel financially strained isn’t news to anyone, least of all HR. Although companies are unlikely to know the exact details because of the sensitivities around individuals’ finances, they do have the pulse of employee realities.
Millions of hardworking people are only just able to manage. Independent research commissioned by Neyber of 10,000 employees evidences the consequences of this. Some of the starkest statistics show that 70% of the UK workforce admit to wasting a fifth of their time at work worrying about finances, which costs the economy an estimated £120.7 billion per annum. At least 17.5 million working hours are lost per year as a result of workers taking time off because of financial stress; 55% of employees say that being under financial pressure affects their behaviour and ability to perform their job in the workplace – and this rises to 62% for those under 34.
The study also evidences how those 'just about managing' lack sufficient buffer savings to meet emergency expenditure needs; with more than 30% of employees having less than a month’s salary held in reserve for these purposes.
The sad situation is that financial education is sorely lacking in this country, and although paternalistic employers feel a sense of responsibility they are limited in what they can do.
We believe employers should be obliged by government to offer support to employees, but in a way that comes at no cost to them. Neyber has called on the government to reform employee benefits by giving the statutory right to access low-cost loans repaid by salary deduction, and free financial education in the workplace. In the same way that auto-enrolment was brought in, a similar legislation could ensure that workers have a right to access fairer finance in their workplace.
Evidence has been given at the House of Lords Financial Exclusion Select Committee. This has recently resulted in a report that says employers can play an important role in preventing financial exclusion and promoting inclusion and that there is an imperative for employers to be proactive in this field. The report – Tackling financial exclusion: A country that works for everyone? – evidences Neyber’s research and says this shows employers have a direct interest in the financial wellbeing of their staff.
We believe that help for employees ideally comprises a range of loan and savings products tailored to the needs of individual employees; all of which would be focused on the management of debt and the development of a renewed savings culture. This would also help employees to surpass the high interest rates charged by high street banks and payday lenders.
By doing this employers help their staff learn about finances, get better at budgeting with online tools, aim to become debt-free, and directly save money through lower cost loans. The latter can, on average, save people £101 per month when consolidating existing debts.
With the study also showing that more than half (53%) of employees seek access to affordable loans and savings in their workplace, employer and government support can’t come soon enough for those in need.
Monica Kalia is co-founder and chief strategy Officer of Neyber