Managing the risk of financially-stressed employees

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Companies, in particular HR, face a monumental challenge today to create and maintain a productive and effective workforce given the draconian labour laws, the staggering absenteeism and the shockingly low productivity figures, as well as the sobering employee theft, fraud and corruption statistics in the country.

This is, perhaps, not really surprising, given that the labour force is drawn from a population that is deeply indebted and financially struggling. This reality is reflected in the National Credit Regulator's statistics which show that nearly half the workforce is under significant financial stress, while the household sector debt-to-disposable income ratio stands at 72.3%, which means that of each R100 South Africans earn, R72.30 is swallowed up by debt repayments. Add to this the high rate of illegal garnishee orders, estimated to be as high as 85%, and it becomes clear that most employees, after a month's work, have very little left to spend on food, transport and other necessities.

This poses a major challenge to businesses that are trying to survive tough economic conditions with a workforce that is under severe financial stress and deeply demoralised by their seemingly hopeless situation. This, in turn, leads to increased absenteeism, reduced productivity, white collar crime, as well as high - and sometimes unreasonable - wage increase demands.

The Credit Amnesty which will be implemented as from 1 April 2014 could compound the problem further, as debt-ridden employees' previous poor credit records will be cleared, allowing them to access even more expensive unsecured debt from unscrupulous credit providers.

"Ultimately, employers who ignore the financial distress of their employees will pay a high price in terms of lost productivity among stressed workers, higher absenteeism as workers try to avoid debt collectors contacting them at work, an increase in employee theft and fraud and ever-higher wage increase demands," says Meyer de Waal of Oosthuizen & Co Meyer de Waal Attorneys and My Budget Fitness. "However, proactive businesses will find that a simple, cost-effective solution is available which will not only reduce their exposure to these risks, but will also contribute to employee loyalty and motivation."

Having identified the core problem as a lack of financial literacy among employees, My Budget Fitness has collaborated with leading service providers to provide this much-needed financial education. To harness economies of scale for cost and time efficiency, this education is provided to employees on a group basis, supplemented by individual coaching where private and confidential information is involved.

The comprehensive group workshop training and the personal coaching is delivered by Energyworks, which provides both practical skills and resources to employees, enabling them to manage their finances, reduce their debt burden and clear and maintain their credit records and, ultimately, opening up the opportunity for these individuals to own their own homes in the longer term.

In addition, My Budget Fitness and Energyworks have combined their service offerings through a joint venture which, in addition to the above services, also confidentially assists employees with other personal, legal and/or social challenges not typically dealt with by HR departments or any other area of management in the workplace.

The skills imparted to employees during the training, as well as during individual consultations that are provided onsite during working hours, include managing their monthly budgets through a free mobile tool, developed by Mobile2Budget. This cellphone application enables employees to track each rand spent, using their mobile phones to record expenditure against their personal budget. The Debt Management application equips employees to deal with debt, manage their finances, and analyse their own credit profiles through comprehensive credit reports. Employees will learn how to analyse their most expensive debt and access debt consolidation solutions, which can result in savings of as much as R18 000 per year in debt repayments. A network of attorneys and other service providers, facilitated by My Budget Fitness and Energyworks, assist employees to repair their credit records with regard to late payment profiles, judgements or debt impairment.

The result is a workforce with a clear understanding of the risks of debt and the process of getting out of debt. For those employees who want to own their own homes, dedicated workshops are hosted to ensure they are prepared for a successful home loan credit application. The Rent2Buy concept - in which employees first rent a property before purchasing the same property - is also introduced to employees.

"The My Budget Fitness training provided to companies' employees is truly comprehensive and presents a real solution to the risks employers face with regard to their employees' financial circumstances," concludes De Waal.

It is a win-win situation for all involved. Employees receive truly valuable assistance with their often dire financial situations, provided through an independent third party via their employers. This results in significantly increased morale and motivation, as employees begin to realise that their situation is not hopeless and that resolving their financial problems, creating financial stability, and even homeownership, is within their reach.

Employers, while proactively managing the risks of absenteeism and low productivity related to financial stress, the higher risk of employee theft and fraud, as well as possible unrealistic wage increase demands, can also add real value to the lives of their employees, building loyalty to the company within a more motivated workforce."

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This edition

Issue 58