Six out of 10 employers are now providing salary advances or loans to workers when needed, yet only one in 10 actively encourages a savings culture according to new industry research.
Howden Employee Benefits & Wellbeing found that 64 per cent of employers said they would consider such options for employees who were struggling financially.
Howden head of benefits strategy Steve Herbert says: “Given that we are now in the 2020s – and that most salary payments are made via bank transfers rather than in cash – it is frankly astonishing that so many employers are still offering access to loans or salary advances.
“Whilst it’s commendable that many organisations are keen to support their employees, doing so does overlook some key concerns for both parties. Aside from the obvious impact on cash-flow and the risk of default, employers need to be aware of the danger of favouritism. Do they offer the same credit facilities to all employees or only some, and how do they avoid setting a precedent in their selection criteria?
“Finally – and certainly not least – without an understanding of the underlying issues and the employee’s ability to repay, they might actually be making things much worse for their employee and their family later in the year.”
The survey of more than 160 employers also found that less than 1 per cent are currently offering access to finance through a recognised workplace finance provider, despite the growth of such offerings in recent years.
Herbert adds: “Workplace finance is a more constructive approach to such issues. By partnering with the employer, finance providers can offer loans based on more than credit score and affordability assessments alone.
“Criteria such as service history, and the ability for repayments to be made via payroll deductions, make a significant difference to many lending decisions. The result is often that finance can be offered where it might otherwise have been declined, and at rates that may not be available from other lenders.”
Herbert adds that employers should also look to signpost employees towards appropriate debt management support and financial education support to help them to regain control of their finances, where appropriate.