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Financial insecurity

Can an employee’s financial position pose a threat to your business?

Is it not true that everyone aspires to financial freedom? We all want the finer things in life whether we can afford them or not. The media jumps on board with a 'you have got to have it now – you owe it to yourself' mentality.

Excessive debt has had catastrophic effects on the global economy but have we learned from our mistakes and will we curb our lavish lifestyles? Economists around the world would have us believe that our economy will only get back to normal when we all start spending again. Is this wise when so many people still have huge debt?

I am afraid this time will be no different. We feel so compelled to keep up with the Jones’s that when things start looking up we will start spending again regardless of the consequences. The malls have become our places of worship!

How does all of this impact on your business environment?

Statistics have shown that employees whose debts are not manageable any longer pose a serious risk to businesses in the following ways:

* They fear the next telephone call as it could be another creditor demanding payment.

* They constantly have to think up excuses because their take-home pay just does not cover all debt repayments.

* They often moonlight to supplement their income, neglecting one or both employers.

* They constantly try to borrow money from their employer or other colleagues, spending vast amounts of time scheming where they will find the money to repay them.

* Many resort to gambling in the belief that this will relieve their financial woes. Gambling will most likely compound their problems.

* As a last resort, a previously honest employee might resort to theft from his employer, always believing he will repay his employer when his luck turns.

During the early stages of their predicament, employees might still concentrate on their jobs. However, as their predicament worsens, the employee becomes distracted and very often depressed. His output and performance declines rapidly to the extent that he becomes a total liability to the employer.

Extensive research done in the USA showed that employees basically want to:

* Reduce debt.

* Build wealth.

* Increase net income.

* Afford a quality retirement.

While these might not seem to be lofty goals very few people actually achieve them. Statistics show that only 6% of people will ever be financially independent. Employees also have to deal with other personal and work related problems such as:

* Divorce.

* Child maintenance.

* Re-marriage.

* Redundancy at work.

* Major illnesses.

* Death of a spouse.

As a result of better medical care people tend to live longer but want to retire earlier thus compounding their financial situation. Everyone thought that having more access to financial information would help people make better choices. Far from it! People are afraid of making mistakes, often resulting in them doing nothing, perpetuating their former spending patterns.

Although employees desire help from employers in many different areas, this assistance seldom materialises as employers do not want to get involved in what they consider to be employees’ private affairs. Employees want help in the area of personal goal setting and require knowledge about:

* The trade-offs between spending and saving.

* Tax structures.

* Savings.

* Differences of savings vehicles.

* Will and estate planning.

* Effective implementation of advice.

When employers do not help employees with the above, employees often select unsuitable financial products. If employers provide the requested services, employees are closer to achieving their goals. Employers benefit because employees are:

* Less stressed.

* More secure.

* More focused and less distracted.

* Healthier.

* More productive, creative and energetic.

Embarking on such a programme could be far more beneficial to the employer than first imagined. Securing your business in such a way could be more cost-effective than installing additional cameras, doing lie detector tests and having to fire delinquent employees. Setting up a solid financial programme for employees will also go a long way toward establishing yourself as an employer of choice.

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