Most South Africans live beyond their means. According to the National Credit Regulator, 80 percent of household income is going towards debt.
Borrowing money seems like the only option in tough economic times but the consequences are often worse than the reality that resulted in the loan in the first place. According to Kay Vittee, CEO of Quest Staffing Solutions, "these consequences not only impact the lender, but their personal and professional relationships as well. It is for this reason that employers need to familiarise themselves with credit trends and the consequences of their staff debt and invest in initiatives or partnerships that proactively address these".
The fourth quarter of the year is a time that puts great demands on personal finances; transport, holidays, parties, gift giving, entertaining friends and family and other social and leisure activities associated with the end of the year can cost more than is in hand. It is for this reason that the NCR report shows that the total credit granted is highest in quarter four when compared to the other three quarters of the year, a pattern that is repeated year on year.
However when the new year starts, so too increased financial pressure due to the loan repayments, interest and new financial demands associated with this time of year. Demands that are needs rather than wants; needs such as school uniforms, school stationery, childcare and transport and work-related costs etc.
The NCR reports that there are currently nearly 10 million consumers (a staggering 46,8 percent of credit active consumers) with impaired credit records.
Servicing debt with mounting financial pressure is difficult and almost impossible if the person was already in financial duress before he or she took out the loan. This situation results in default payments, arrears and the associated unpleasantness of trying to manage the demands and threats that quickly become frequent correspondence.
A recent Northwestern Medicine study shows that high debt and the financial pressures associated with it can have negative effects on a person’s health. Emotionally and physically the stress of trying to cope with the downward spiral of unsecured debt takes its toll on both personal and professional lives.
Financial stress can break up relationships and families and further impact a person's ability to earn because of the effect it has on work performance and attendance.
"Employees who are preoccupied with or buckling under the weight and worry of debt start to take more sick days off work, either because of lack of money for transport or actual sickness as a result of the stress." says Vittee.
"Work performance also suffers; this and poor attendance records, quickly put a person in danger of losing their job and income," says Vittee.
"Although many employers may think that the personal financial situation of their employees is not their problem, these scenarios certainly are. It is therefore important that employers take responsibility to inform and advise their employees of ways to save money, live within their means and manage their debt."
Prevention is always better than cure so educate on ways to live a financially sensible life.
"Include saving tips in your yearend communication to staff and incorporate a directory of reliable advice and assistance resources," suggests Vittee.
"Be careful not to regurgitate clichés, rather demonstrate an understanding of your staff’s realities and make the advice as relevant as possible. Perhaps even invest time and energy in solutions that would make your staff’s life easier and more cost effective, such as creating a car pool directory on your company’s intranet or notice board, facilitating onsite food and drink provisions at reasonable prices etc."
"Be prepared for the seasonal challenges by equipping HR with the necessary knowledge on how to consult staff on the cultural and family pressures of this time of year," says Vittee. "With the high financial demands associated with this season, make it an ideal time to start education and intervention initiatives."
Creating a credit-wise staff body starts with awareness, here are a few tips on how to advise employees:
- Know your credit rating. Every person is entitled to one free credit report per year.
- Educate yourself on your creditors, the terms of your agreements and the balances outstanding.
- Create an accurate budget using this factual information.
- Analyse your financial health and if your debt exceeds your income then investigate ways to manage the situation immediately.
- Speak to your creditors or consult with a registered debt counsellor to negotiate on your behalf in an attempt to lower repayments.
- Adjust your lifestyle to live within your means.
If your business makes use of temporary or flexible outsourced staff, insist that your staffing provider offers their staff similar financial advice and benefits.
"Despite the great strides Adcorp Holdings has made in positioning the flexible career with financial institutions, flexible staff are not always afforded the same access to finances and advice as permanent staff are," says Vittee.
"It is for this reason and the impact it has on the attendance and performance of our staff at our client sites, that we offer our 10 000 plus working flexstaff access to income protection, insurances, finance and advice such as a debt counselling service."