Helping employees out of the red can keep your business in the black

February 15, 2008 on 10:49 am | In Bankruptcy, Debt Management, IVA's

Latest figures show that Britain’s personal debt problem has hit the £1.17 trillion mark, up 10 per cent on last year and with cases of personal insolvency at a record high, it is clearly out of control.

Many businesses already provide their employees with a combination of healthcare, pensions, flexible benefits and company vehicle packages, so why not move with the growing needs of many employees and set up a support and advice service to deal with personal issues such as debt worries, which ultimately detract from an employee’s performance in the workplace. It is such support which should be included in the Human Resource manager’s job description.

It is estimated that at least 25% of the adult population have a problem with debt. Taking a workforce in isolation, it is not unreasonable to assume that 25% are insolvent and could be declared bankrupt.

Bankruptcy is a taboo with employers. Currently, many large corporate organisations have rigid clauses in employment contracts which state that if bankruptcy does occur, employment will be terminated. Where is the sense in that? If an employee is trying to get out of debt and struggling, employers should be approachable and show their support, helping employees to get back on their feet. Surely that would be much more responsible and show the company as being a caring and supportive employer, rather one which sacks struggling employees, perhaps just to save face. Clearly, by helping employees the company retains valued personnel and avoids the costs of having to find an experienced replacement.

Human Resource managers should be aware of the options available or be able to point an employee in the right direction to get help. An alternative and more subtle option to bankruptcy is an Individual Voluntary Agreement (IVA) and something which employers should look to educate employees about. Put simply, an IVA is a private deal between a debtor and their creditors to repay a percentage of the debt over an agreed term. At the end of the IVA any outstanding debt is written off. IVA’s do not have the stigma that is attached to bankruptcy and the information is not released into the public domain, meaning that the impact on both the reputation of the debtor and their employer can be controlled.

It can be a humiliating experience to admit that you are in debt beyond your control, so by being supportive, employers can make the process that little bit more bearable. Of course I’m not suggesting that HR departments should become insolvency practitioners (IPs), but should put out messages to the workforce that the company is there to help in respect of all personal issues including debt problems. If HRs knew the basic options available and had contacts with a reputable IP, they could help employees to get the best possible advice so that they can improve their financial situation.

It’s in an employer’s best interest to help workers tackle debt problems, as with it comes a great deal of stress and anxiety, which can have a huge impact on productivity in the workplace. Stress affects around 7million people in the UK, with many stating that money worries are a main cause.

With consumer debt rising so rapidly and showing no signs of a slowdown, personal insolvency should no longer be a taboo subject but should be openly talked about with employees so that they have the confidence to make the necessary moves to get out of debt, before it escalates into something less manageable and much more public.

 

No Comments yet

RSS feed for comments on this post. TrackBack URI

Leave a comment

Comments

XHTML:<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Our Promise