My employees are drowning in debt...
Published Date: 2018-02-20 | Source: Simply Financial Services | Author: Simply
...what can I do to help?
South Africans are facing a debt crisis. According the World Bank's Global Findex Database report, in 2015 86% of South Africans took out a loan, making us the biggest borrowers in the world. A recent survey by Debt Rescue found that only 23% of us have money left over at the end of the month, with more than half of us spending 75% of our salaries on debt. For individuals in such a situation the financial costs are high, but the psychological costs are higher.
Neuroscience teaches us that a person who is wrapped up in worrying about money loses access to their prefrontal cortex, the region of the brain responsible for the management of higher faculties like innovation, strategic thinking, decision making and self development - capabilities you really want your employees to be engaging. Anxiety and fear trigger a fight or flight response in the human brain, which correlates with high levels of cortisol and adrenaline, chemicals that are fantastically helpful when we're trying to get out of danger, but the total opposite when we're trying to arrive at a creative solution to a customer's problem. Employees who are distracted by debt concerns are not only less productive, the work that they are delivering is likely of a lower quality.
So, it's clearly in your business's interests to help your employees out of debt, but where to start? Here are some tips to help you change the game:
- Don't shoulder the financial burden. Indebtedness is a difficult, and often emotional, issue. Don't let your concern for your employees encourage you to take over management of their debt for them. This disempowers the employee, very likely creates tension in the working relationship, and potentially places you in a legal corner. It is far more valuable to put the power and control in your employee's hands through education and development. Assist them in completing a financial literacy course and encourage them to actively seek the type of advice published on the Simply Money blog.
- Build financial wellness. If you have an employee wellbeing programme, include a focus on financial wellness. If you don't have an established wellbeing programme, draw on the resources within your organisation and begin publishing tips and guidance on financial wellbeing. Make it fun and make it practical. Make an effort to understand the financial literacy level of your average employee and pitch your educational efforts there.
- Be proactive. Being over-indebted is toxic and has a negative knock-on effect in one's life. Reducing debt has the opposite effect, often empowering the individual and building financial confidence. This promises better outcomes for your staff and your business. Don't wait for your employees to come to you before you take action against debt. Initiate the conversation, engage the issue, work towards removing the stigma around debt. It can be a sensitive topic, so identify individuals within the organisation who could help promote positive dialogue. A proactive approach helps to establish visible leadership and build organisational trust.
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