What role do workplace loans play in a financial wellbeing strategy?
Employees’ financial issues are becoming a prominent issue for employers, and the numbers offering workplace loans as an employee benefit has increased.
Employers that offer a workplace loan scheme enable their employees to apply for a loan through the organisation and its chosen provider, rather than by having to approach a traditional high-street lender. Repayments on the loan are then made using salary deductions from the employee’s net pay.
Taking out a loan through a workplace scheme can also enable employees to better manage their finances based on their individual circumstances. Darren Laverty, Partner at Secondsight states “If people are quite used to paying the debt, the same money, once it gets cleared, can go into savings and get them into a good place.”
However, Darren does argue that there is a danger that with employer endorsement, some employees may be tempted to use a workplace loan as a savings shortcut, to purchase items immediately with the aid of a loan rather than saving for them. “[Employers have] got to be careful how [they] communicate [workplace loans] because [they] don’t want it to be seen as the normal thing to do in everyday life,” he says. “[They’ve] got to be careful they’re not making it too promotional.”
Read the article in full from Employee Benefits here