Paying employee debt
WANT TO REALLY CAPTURE THE LOYALTY OF BRIGHT YOUNG WORKERS? HELP THEM WITH THEIR STUPEFYING STUDENT LOANS
It was an otherwise unremarkable day in mid-February when nascent computer scientist Evan Maynard received some tremendous news. In a meeting with his boss, Maynard, who will graduate from St. Mary’s University this spring, learned that the company where he had been working part-time for nearly a year wanted to help him pay off his student loan—if he had no objections, of course. “It’s an understatement to say that I was overjoyed,” recalls Maynard, a bright and ebullient 23-year-old. “I think I high-fived [my boss].”
Maynard’s enthusiastic response is exactly what his employer, Dartmouth, N.S.-based digital marketing firm Simply-Cast, wanted. CEO Saeed El-Darahali—who himself spent years paying off his $50,000 student debt— created an employee debt assistance program as a “pay it forward” gesture, but it’s also a canny recruitment strategy. Since launching the program in May 2015, he’s received hundreds of calls from job-seekers.
Employers can no longer count on wowing prospects with nap pods or vintage arcade games; in the age of Google, such perks are practically table stakes. By contrast, very few employers are doing anything to help talented young people with the massive stressor most face as they graduate from school: loan debt. According to TD Economics, a typical degree costs a student $55,000; that shoots up to $84,000 for those who don’t live at home. Burdened by student loan payments, new grads can fall quickly into credit card and other debt, compounding already tenuous financial situations.
In this context, employers who offer to help seem awfully appealing. It’s a concept that’s already established in the U.S., where firms such as PwC offer student debt subsidies (the firm gives junior associates a yearly benefit of $1,200 to go toward loans). It’s still a rare incentive in Canada, which is why companies who offer it stand to garner attention, says Andy Robling, senior vice-president of client devel- opment at recruiting firm Hays: “They’d find themselves in a very strong position to attract some of the best talent in the market.”
Tim DeMello, CEO of Gradifi, a Bostonbased company that has developed a software platform to help companies automate staff debt payments, has seen it happen. His clients, most of which are American, see the immediate value of the cost when they realize the impact it has on publicity and staff retention. One such client is Powertex, a Wisconsin graphic design firm that offers 20 employees $100 a month each for debt repayment. That’s an annual expense of $24,000—far less than $40,000, which, according to a 2014 study, is what it costs a typical small business to make a single hire.
The expense of a loan repayment perk can be recouped in less tangible ways, too. As anyone who’s dodged calls from collections agents knows, debt creates stress, which spawns all sorts of nasty offshoots in the workplace: lowered productivity, higher absenteeism, toxic morale. According to a recent study from Willis Towers Watson, highly stressed Canadians take nearly 50% more sick days than their blissed-out peers.
Besides, a program doesn’t have to be universal to have an impact. El-Darahali doesn’t offer debt assistance to every employee—only a handful of staffers have qualified for the program since its launch—but that hasn’t stopped the flow of killer CVs crossing his desk.
As one of the lucky ones at Simply-Cast, Maynard gets a $500 top up to his paycheque each month—enough to help him fast-track payment of his $45,000 debt load. It’s enough to ease his debt-related anxiety and leaves him with a lot of love for, and loyalty toward, his employer: “It makes me feel like my company understands me.”