Debt relief

More employers help workers with their debts

Millions of Americans get their health insurance and retirement accounts through their employers. Now some are getting help with their debt.

A look at some of the approaches:

1 Financial stress takes a toll

Human resources company Mercer has estimated financial stress costs U.S. businesses up to $250 billion a year. Debt appears to play a leading role in creating that stress. Seven out of 10 employers in a survey last year said that debt was the No. 1 financial challenge faced by their employees, according to the International Foundation of Employee Benefit Plans.

Programs to help workers pay student loans were among the first debt-focused employee benefits companies offered, but they’re still not common. Employers that offer the benefit typically provide about $100 a month for a set number of years or with a lifetime maximum, often around $10,000.

2 Paycheck-to-paycheck workers

Employers may not be aware how many of their workers need emergency loans to make ends meet, says Ennie Lim, HoneyBee president and chief executive. Twenty-two percent of HoneyBee’s borrowers last year earned less than $30,000, while 52 percent made between $30,000 and $50,000, Lim says. HoneyBee, like competitors TrueConnect and Salary Finance, offers small loans that can be repaid over time. PayActiv, meanwhile, allows employees to tap into wages they've already earned through payday advances.

Brightside does not loan money directly. Instead, it trains financial assistants to work with employees who have money issues. MedPut, meanwhile, helps workers with their medical bills. The startup focused on medical bills since those can be a huge stressor for employees, says Harsha Puvvada, MedPut co-founder.

3 ‘Like bailing a leaky boat’

Many employers are focused on improving their workers’ physical health to reduce insurance costs but often ignore the financial stress that’s undermining physical wellness, says Jennifer Tescher, CEO of the Center for Financial Services Innovation. That approach is “like bailing a leaky boat,” she says.

The workplace can be a good venue for debt help and education, because it’s where people get paid, have the opportunity to save for retirement and participate in other voluntary benefits, she says.

Of course, debt assistance programs have the same drawback as employer-provided health insurance and workplace retirement accounts: Not everyone has access, and even those who do could lose the benefit in the next layoff. But employer-provided debt assistance is potentially helpful enough, and the need is great enough, that more companies should consider offering it.