Supporting employees’ financial health can pay off
All managers want their employees focused on the task at hand, but workers find it hard to concentrate when creditors come calling, their cars break down or the rent is overdue.
While most employers offer health care, fewer pay any attention to their employees’ financial health. About half of Texas workers lack emergency savings, and more than 40 percent rely on nonbank borrowing, such as payday lenders and title loans, this year’s National
Financial Capability Study states.
Any executive curious about the financial wellbeing of his or her workforce need only ask human resources how often employees download copies of their pay stub, said Francis Gonzalez, San Antonio program officer for the Asset Funders Network
“You’d be surprised how many of those are being pulled down by people who take them to a payday lender,” Gonzalez added.
The flipside of employee stability indicators can reflect levels of employee stress: turnover, attendance problems and more frequent income verification requests.
Gonzalez spoke at an Asset Funders Network seminar to promote employer financial wellness programs, not only to help workers manage their money, but help companies reduce employee turnover and boost productivity.
The nonprofit network, led by JP Morgan Chase bank, connects companies with nonprofit and for-profit services that provide low-cost or free assistance. The network strives to reduce poverty by providing low-income workers with the knowl
edge necessary to avoid debt.
Houston and San Antonio both have a higher percentage of working poor than the rest of the country. According to the personal finance website Wallet Hub, residents in both cities are among the worst off when it comes to high-interest credit cards and paying off monthly balances.
Texans also rely too heavily on nonbank lenders, such as payday lenders, auto title loan companies or pawn shops, which can charge fees and interest equal to an annual percentage rate of 661 percent.
Unsurprisingly, only 14 percent of borrowers say they can afford to repay these loans out of their monthly budget, surveys by the Pew Charitable Trust show.
Failure to promptly repay triggers a financial death spiral, where borrowers take out additional loans and incur punitive fees. About 85 percent of payday loans are to pay off previous loans, the Consumer Financial Protection Bureau reports.
Ultimately, borrowers lose their cars, ruin their credit and lose their homes.
Responsible employers want to keep their employees away from predatory lenders, and banks and nonprofits are lining up to help.
WorkLife Partnership is a nonprofit that for a fee provides on-call navigators to help workers obtain the financial services and information they need, said Valerie Wendell, a senior vice president.
“We can also help employers understand their workforce better,” she added. “We can say: ‘Hey, we’re noticing that credit is a real issue, or we have a lot of employees who are unsure how to navigate their health insurance and facing very large medical bills … then we can specialize and create workshops that can be offered on-site.”
In surveys commissioned by Asset Funders, employees say what they need most is access to short-term loans when household emergencies strike. They’re happy to repay the loan through automatic payroll deductions, but without good credit, they end up at payday loan centers.
The Community Loan Center of America franchises an affordable emergency loan program that connects local banks and credit unions with employers at
no cost. No credit reports or collateral is required, and the program offers affordable repayment plans and quick approval, said Matt Hull, executive director of Texas Association of Community Development Corporations.
“We control the software and the branding; we have all the logos and the marketing material. We think of this as a turnkey product,” Hull said.
Because the lender collects the payments with automatic payroll deductions, default rates are far lower than industry averages, and it costs the employer nothing, he added.
The city of Houston is the largest Texas employer enrolled in a CLC program, and IBC Bank recently signed up as the first lender to offer CLC services in San Antonio.
The most challenging part is convincing senior executives and HR departments, which typically have no experience with predatory lenders, that the program is needed, Hull said.
Every business, though, has a stake in its employees’ financial well-being. Firing trained employees because their cars were repossessed when they couldn’t pay predatory loans they took to fix the car makes little sense.
Without much effort, employers can make a real difference in workers’ lives, and simultaneously earn loyalty at a time when finding good help never has been more difficult.