CEO Suggests Employers Offer Payday Loan Alternatives and Other Benefits

Inside Subprime: April 9, 2019

By Lindsay Frankel

As the CEO of a voluntary benefit provider of an employee purchase program writes in BizJournals, it’s important for companies to be aware of the financial difficulties their employees face. Even in a strong economy, employers should assist financially fragile employees with voluntary benefits that meet their financial needs and help protect them from payday loans.

“Corporations need to be more empathetic to the financial decisions that many of their employees have to make on a daily basis. Recognizing the importance of financially-healthy employees is critical, as is providing benefits that assist those employees to improve their financial situation,” the CEO writes.

For most Americans, staying on top of finances is an ongoing struggle. 78 percent of U.S. adults are living paycheck to paycheck, according to a 2017 CareerBuilder report. And it’s not just a problem for low wage workers – 10 percent of six-figure earners aren’t putting anything aside for savings, either.

While wages have remained stagnant for most workers, rising healthcare costs and rising student debt have contributed to greater financial insecurity for many people. About 40 percent of Americans don’t have $400 in savings that they can use to cover an unexpected expense, and 25 percent of U.S. adults don’t have anything saved for retirement, according to a 2018 report.

All of this adds up to greater stress for employees. PwC’s Employee Financial Wellness Survey revealed that almost half of employees feel stressed about their financial circumstances, and 41 percent reported increased levels of stress over the last year.

What’s more, numerous studies show that high levels of financial stress cause health problems in employees, which increases the cost of care for these individuals. Those carrying financial debts have heart attacks twice as often as their financially secure co-workers, and they’re much more likely to experience anxiety and depression as well. The CEO notes that employees miss work to take care of their healthcare needs, which negatively impacts productivity.

For employees living paycheck to paycheck, an unexpected expense can lead to methods of borrowing that cause even greater financial distress, especially for those who have bad credit or lack access to traditional loans. Sometimes, payday loans and other high-interest products are the only options available for cash-strapped employees. But these options can exacerbate the problem, the CEO notes. “It’s often the hidden costs and fees associated with high-risk credit options that take a financially fragile situation and make it worse.”

So, what can employers do to improve the situation? Financial education can help, but the CEO suggests provided an even broader array of benefits that create financial flexibility for employees. These might include:

  • Low-interest loans to meet the credit needs of employees, providing an alternative to risky payday loans
  • Benefit programs that help with student loan repayment
  • Savings programs that help employees make automatic deposits from their paychecks into their savings accounts each month
  • Bill payment programs, which can assist employees with making on-time payments through payroll deductions
  • Purchasing programs that let employees buy products and services with their paychecks instead of using cash or credit

Employers have the ability to help workers achieve greater financial security through the financial benefits they provide. Reducing financial stress on employees in turn creates happier, healthier, and more productive workers; when employers are aware of their employees’ financial needs and proactive about serving them, everyone benefits.

For more information on scams, predatory lenders and payday loans, see our city and state financial guides including states and cities like CaliforniaTexas, Illinois and more.