Why salary-deducted loans are a key tool in financial wellbeing


Employee demand for financial wellbeing support is growing, and such a service brings benefits for employers in turn, says Neyber co-founder and chief strategy officer Monica Kalia

The UK’s workforce – like wider society – has evolved in the 21st century. Employees are far more open about their personal life and the issues they face both inside and outside work, and they demand a different relationship with their employer than was the case years ago. Progressive employers are starting to recognise this and to support their workforce in leading fuller, less stressful, more sustainable lives.

This trend has been driven in part by younger generations who regard their employer as an enabler that they work with, rather than as a provider that they work for, as older generations tend to do. One particular area in which a greater openness is being sought is financial wellbeing, despite the long-held British taboo about discussing one’s personal finances. As a result, we are beginning to understand the impact that concerns about money, lack of savings and levels of debt can have on the wellbeing of working people.

Our survey of 10,000 UK employees, entitled The DNA of Financial Wellbeing, revealed that the UK working population lacked financial resilience, and the proportion struggling with money worries had increased over the past year, from 65 per cent in January 2015 to 70 per cent just over a year later. Financial wellbeing is also having a negative impact on business productivity, potentially costing employers £120bn a year as 70 per cent of the UK workforce admit to wasting a fifth of their time at work worrying about their finances.

So this poses two big questions: do employers have a role to play in their workforce’s wellbeing and do they need to invest more in financial support and education?

The answer to both is yes. Financial wellbeing must become a core element of any organisation’s overall employee wellbeing strategy – alongside physical and mental health. Financial wellbeing is not new but it has been somewhat overlooked, despite the fact that it is affected by reward and benefit packages across the board.

Just as employees are becoming more open about their personal finance concerns, so too do they expect more help from their employer. While an employer itself cannot provide financial or debt advice to individual employees, clearly it can offer more support. By implementing a financial wellbeing programme, employers can provide their people with access to experts who can educate them on their financial situation and give them the information they need.

There is a real opportunity for employers to help their staff to lead richer, less stressful lives by giving them access to fairer finance. Partnering with a benefits provider that offers salary-deducted loans gives employees the opportunity to consolidate their debt in a more manageable and affordable way. Rather than seeking a loan from a bank or payday loan company, employees can get a fairer rate and have a repayment plan tailored to their individual circumstances.

Therefore, by receiving the right benefits and support from employers, employees can learn to borrow sensibly and begin paying into savings and a pension.

While different generations of employee do not share the same financial concerns, most employees would welcome access to affordable loans and savings, financial awareness programmes, and support and guidance from their employer. But this poses two further questions: how much will financial support cost and can employers afford to provide it?

The answer to the latter is yes. Salary-deducted loans are an extension of what many employers do when they offer season ticket loans – that is, employees pay back the loan directly from their salary before it enters their current account. In this way, the employer has greater certainty of repayment.

The ripple effect of an enhanced financial situation improves employee productivity, encourages a more open relationship with their employer, reduces staff turnover and, as a result, has a significant positive impact on the company’s performance. By offering programmes that assist employees with their personal finance needs, employers can provide invaluable support for their staff and positively impact their bottom line.