How to help employees struggling with debt

April 2022

The Office of National Statistics has reported this week that the cost of living, calculated using the Consumer Price Index (CPI), has increased by 6.2% since February 2021. With soaring fuel prices, food and necessities along with the planned increase of National Insurance contributions (NICs) in April 2022, many people are facing a debt crisis.

If an employee is struggling with debt, it can be difficult for them to know where to turn for help and support. There are a number of different organisations and services that can offer advice and assistance, so it's worth them doing some research to find the best option for their situation.

Firstly, people should consider whether they can have a conversation with their employer. Problems with debt not only affect home life, they also affect work life too. Employees who are struggling with debt problems exhibit lower levels of performance and have increased levels of absenteeism. These issues cost businesses money and many companies are conscious they need to support their employees through these harder times.

As an employer, it is worth running toolbox talks to let employees know that there is an open-door policy and that employees can have a confidential conversation with their employer or HR team to make them aware of the situation. Employers can offer support and guidance on organisations that may be able to assist.

One such organisation is the MoneyAdvice Service, which is a free service set up by the government to provide impartial advice on money matters. They have a dedicated debt advice section on their website, which includes information on dealing with problem debt, as well as a debt advice tool that can help debtors work out what steps to take.

Another organisation is MoneyHelper. Money Helper offers free, confidential advice for people struggling with debt. With specially trained debt advisors, Money Helper offers solutions to help people get out of debt faster. Their service offers:

-       Advice on money management

-       Investigation into benefits or financial support that theindividual may be entitled to

-       Looking at the different options for dealing with debt

-       Speaking to creditors about payment holidays or reduced payments

-       Confidentiality

Stepchange is a national debt charity that offers support and guidance to those struggling with debt. They offer free confidential advice and support for the length of time that the person needs it. They have a short survey on their website which determines the level of support needed by the individual and can tailor programmes to help reduce the risk of problem debt.

Stepchange’s solutions include:

-       Debt management plans (DMP) – these help the individual pay off their debts at a more affordable rate with reduced monthly payments

-       Individual voluntary arrangement (IVA) – this is an arrangement made with the creditor. It is a formal agreement which allows the debtor to make affordable payment for the debts, usually over five or six years. At the end of the IVA any unsecured debt left is written off.

-       Debt recovery order (DRO) - A DRO freezes debt repayments and interest for 12 months. If the debtors’ financial situation hasn’t changed at the end of this period, then all of the debts remaining will be written off.

-       Debt arrangement scheme (DAS) – available in Scotland only, the Debt arrangement scheme allows debtors to apply for a debt payment programme (DPP) which helps them repay the debts by making affordable monthly payments.

-       Other options include Equity release or bankruptcy.

Stepchange’s website has a number of tools that are helpful for an individual to deal with their debt. Tools include:

-       Credit card payment calculator

-       Debt consolidation calculator

-       Equity release calculator

-       60 second debt test

-       Online benefits calculator

-       Guides and case studies

 

The National Debtline is another charity that operates across the UK to support those struggling with debt and money management. They have an excellent factsheet library which provides advice and information on a wide range of debt issues and options for dealing with debt. The National Debtline has advisors who give free and independent debt advice over the phone or via webchat.

When struggling to make ends meet, it may also be worth having a conversation with the Citizens Advice Bureau (‘CAB’). Citizens Adviceis an independent organisation specialising in confidential information and advice to assist people with legal, debt, consumer, housing and other problems in the United Kingdom. The CAB can provide advice on a range of money-related issues, including debt, benefits and employment rights.

For those struggling to keep up with repayments, contact can also be made directly with the lender to see if they have options available for support. Many lenders are now prepared to make arrangements such as temporary payment holidays or more flexible repayment terms.

 

There is no one-size-fits-all solution when it comes to dealing with debt problems, but there is help available for those that need it. For people struggling with debt, the best option is to take action and start the conversation. By doing this, the problem can start to be addressed, reducing the risk of the debt spiralling further.

 

How does PayCaptain help?

PayCaptain has functionality built into the mobile app which is designed specifically to help vulnerable and low-income employees to improve their financial well-being.

Features include:

-        Money planning tool – where employees can create a personal budget as well as access helpful financial guidance. PayCaptain is passionate about giving employees the opportunity to understand their income and spending, which leads to an increase in financial well-being.

-       Financial well-being scoring – this is a survey for employees that creates a financial score and provides guidance to help financial well-being.

-       Personalised financial guidance – trusted financial guidance can be accessed directly through the PayCaptain app. The PayCaptain Team is also available to support employees directly with best practice information and recommendations for money management.

-       Payment splitting – this functionality allows employees to make payments direct from their net pay to landlords, loans, credit cards, mortgages etc – eliminating the risk of missing an important payment.

-       Emergency wage advances – this functionality enables employees to access emergency cash and automatic weekly advances. Weekly funds can be helpful for employees to manage part of their budget on a weekly basis and keep funds protected for their bills and direct debits at the end of the month.

-       Savings – the PayCaptain app makes it easy to save money every month, so employees can build reserve funds to access in times of need. Employees can pre-plan the amount to save and it is automatically transferred from net pay. When an employee doesn’t have an existing savings account, one can be opened directly through the PayCaptain app.

In summary, there are lots of charities and organisations that can help people deal with debt. Often, however, employees are embarrassed or scared about their financial situation and are hesitant in making the move to seek advice and guidance. Employers are in a position where they can help their employees, by speaking about debt in the workplace and offering support through the process. They can offer their employees the tools to help improve financial well-being through their payroll solution as well as giving guidance on organisations where the employee can seek confidential expert help.

 

To learn more about how PayCaptain can help your business, contact us for an informal, no obligation chat. We’ll be happy to demo PayCaptain for you.

 

PayCaptainPayroll Solutions Limited, www.paycaptain.com is an HR/FinTech company that delivers a fully automated cloud payroll service. The solution contains many unique and innovative features for employees, helping them to take control of their pay and increase their financial well-being. PayCaptain is a payroll solution that helps employers pay their workforce, regardless of income and personal circumstances. The solution also incorporates functionality that is specifically designed to positively impact financial resilience for people struggling with money, or vulnerable and low-income employees.

PayCaptainis the first B-Corporation certified payroll company in the world. To read moreabout B-Corporations, visit www.bcorporation.net

Sources of debt management and support:

www.citizensadvice.org.uk

www.nationaldebtline.org

www.moneyhelper.co.uk

www.moneyadvice.co.uk

www.stepchange.org

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