Easing the Burden of Employees’ Debt

By Peter Weaver and Gina Rollins Jul 1, 2008
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Personal finance issues create stress for many workers; sound advice can alleviate some worries and help make employees more productive.

At Enterprise Integration Inc., a Jacksonville, Fla.-based information technology company, “Some of our people [are] so deep in credit card debt, they can’t dig themselves out,” says Human Resource Director Kimberly Steigelman, SPHR.

“Some workers have gotten themselves into variable-rate mortgages because they seemed to be a good bet at the time,” Steigelman continues. Now, “rates have gone way up, and all too many homeowners can’t make their mortgage payments on top of all their other expenses.”

It’s not just homeowners who have budget problems. “Our employees are struggling with the rising cost of health care and, at the same time, are trying to put away money in 401(k) and other retirement plans,” adds Patricia Knight, PHR, an HR manager with Kaplan Early Learning Co. in Lewisville, N.C.

According to Howard S. Dvorkin, founder and chief executive officer of Consolidated Credit Counseling Services (CCCS) in Fort Lauderdale, Fla., and author of Credit Hell: How To Dig Out Of Debt (John Wiley and Sons, 2005), it’s common “to see employees balancing their checkbooks at work, calling their banks and calling creditors while they are supposed to be on the job.”

On top of this, Dvorkin says, more people are getting “second jobs as waiters and waitresses, working at night and working on weekends to the point where they’re too tired and not able to focus well on the work at hand.”

As bad news mounts on the economic front, more employers are taking a strong proactive approach to help their employees better manage personal finances. Whether through workshops, courses, online resources or one-on-one sessions with financial counselors, experts say these investments pay big dividends.

“If it saves HR [the time and energy spent on] one wage garnishment per month, it’s worth it,” contends Catherine M. Williams, who administers financial literacy programs for Money Management International, a nonprofit credit counseling organization in Chicago.

Equipping workers to deal with the financial challenges of life, the argument goes, gives them confidence and security that carries into their work through increased productivity, job satisfaction and retention.

“In the same way that we have doctors come in to discuss medical topics like diabetes, this is a focus on financial health,” explains Linda Fry, HR specialist with the Pompano Beach, Fla., city government.

Employers are not the only ones interested in raising awareness of personal finance. In January, President Bush established the President’s Advisory Council on Financial Literacy, made up of leaders from business, faith and nonprofit communities. It includes Janet Parker, SPHR, executive vice president of human resources at Regions Financial Corp. in Birmingham, Ala., and chair of the SHRM Board of Directors. The council will work with the public and private sectors to boost financial education efforts, increase access to financial services, establish measures of national financial literacy and conduct research on financial knowledge.

Not Just Investment Advice

Many credit unions and other employee organizations offer financial management courses for employers to consider. Such personal finance advice goes far beyond that offered in the context of retirement planning.

Employees today find “more financial planning responsibilities they have to take responsibility for because the days of paternalistic management support are gone,” says Senior Vice President Arthur Mazor at Fidelity HR Services, based in Marlborough, Mass.

Although Fidelity’s financial planners generally provide advice on investments rather than budgeting or debt management, Mazor says, “financial planners and other investment experts are brought in for seminars after working hours.” Of course, “It has to be made clear that financial planning advice is not coming from the employer.”

Make sure you do background research and that financial advisors have all necessary education, licenses and certifications, advises Antoinette Pilzner, a shareholder with Butzel Long in Ann Arbor, Mich., and a former member of the Society for Human Resource Management’s (SHRM) Total Rewards/Compensation and Benefits Special Expertise Panel. If the employer holds a person or organization out as a resource, the employer has a general fiduciary responsibility under federal and some state laws to vet that entity. Pilzner says it would probably be a good idea to issue a caveat that the employer doesn’t recommend the resource, but just makes it available; employees remain free to use any resource they want.

Diverse Offerings

How can employers find experts effective at conveying personal finance information and hands-on problem-solving skills for employee audiences?

“We are getting word-of-mouth referrals from employees who have gone through programs outside of our organization,” says Steigelman. She wants to contract with a third party, such as a credit counselor, to offer workshops on-site. “This is from employees coming to me and raising issues confidentially about having credit card problems or issues in the housing market,” she explains. “Right now, our answer is to refer them to our employee assistance provider, but we’d like to offer more education to more people and maybe catch people earlier in whatever financial challenges they may be facing.”

Stephen Cullum, HR manager for Ampacet Corp., a Tarrytown, N.Y., manufacturer of colors and additives for the plastics industry, says employees can seek financial advice through either the company’s employee assistance provider or its credit union.

However, to expand the financial education available to its workforce, Ampacet plans to pilot a program this year with its 401(k) provider, Wachovia. Representatives from Wachovia will offer financial seminars at Ampacet headquarters. Eventually, the program will be offered to Ampacet employees nationwide. Although many sessions will address investments, several will cover personal finance topics such as budgeting.

Other employers are getting together to provide money management courses for their employees. Five major corporations in Chicago sponsor Money Management International’s lunch-and-learn personal finance seminars. A typical three-workshop series costs $125 per person. The sessions focus on financial goal-setting and budgeting; credit issues, including the credit reporting process; and savings. The goal: to build a financial education foundation that enables workers to “move from being spenders to budgeters to savers to investors,” says Williams. The number of attendees varies by employer; Williams has presented to audiences ranging from a handful of people at an auto-parts store to groups of 50 at Fortune 100 companies.

ComPsych Corp., a Chicago-based provider of employee assistance programs, offers employers lunch-and-learn classes that cover topics such as getting beyond living paycheck to paycheck, teaching children how to manage money, planning and transitioning into retirement, and planning and saving for college.

IBM’s MoneySmart program provides in-person and web-based seminars, one-on-one planning sessions, and online tools that cover such issues as managing debt and housing expenditures, budgeting for college, and planning for retirement. Eventually, there will be a protected web portal where employees can maintain personal action lists, store financial data, and access tools and content. Although the $50 million, three-year program, launched in March 2007, coincides with a transition from traditional retirement benefits to a “401(k) Plus Plan,” it strives to educate employees about these broader personal finance topics. So far, 60,000 employees have participated, according to Laurie Friedman, corporate communications spokesperson.

In Pompano Beach, Fry says, “we provide credit counseling for all of our employees.” A credit professional from CCCS presents lunch-and-learn programs to make personal finance information available and answer questions about credit and saving. About 20 to 25 people attend each workshop. In four years, 5 percent to 7 percent of the city’s workforce has made follow-up inquiries to CCCS, according to Fry. The workshops are free to the city; employees who desire one-on-one counseling pay the nonprofit a nominal fee.

All told, Fry says, “these sessions sharpen our employees’ sense of well-being and job satisfaction.”

According to a recent CCCS survey, American families these days pay more than $1,200 a year in credit card fees and interest and have an average of $2,500 in unsecured debt in more than two accounts -- and their balances keep climbing.

Counseling Helps

As proof of financial education programs’ success, Williams cites the case of a 35-year-old Chicago woman who works for a sales staffing company. The woman has chronic health problems, and her insurance doesn’t cover all her expenses. In fact, she missed so much time at work, her paycheck was reduced.

The woman found Money Management International through a list of resources in her employer’s HR department. In one-on-one sessions, Williams says, “We helped her work out a budget and put her in touch with resources that could provide access to low-cost medicines.” The woman didn’t realize she qualified for big discounts. Her employer drew up a schedule where she could work from home two days a week. This cut commuting costs, decreased stress and ultimately improved productivity.

“Showing employees how to set up a workable budget can be a key to their financial health and productivity,” adds Barbara Campbell, director of ComPsych’s Financial Connect service, which provides personal finance information and counseling for clients’ employees.

“You want a well-educated workforce that manages the wages they’re being paid. It lessens HR and payroll issues, and it makes the employees happier and more productive,” Williams contends.

The authors are freelance writers in the Washington, D.C., area.


Indicators Show Need For Financial Education

In a weekly online survey conducted Jan. 8, Society for Human Resource Management researchers asked a sample of 329 members about personal finance issues among their employees and their companies’ financial management education programs.

The survey reveals an uptick in potential indicators of personal financial issues among employees. Respondents reported a:

  • 39 percent increase during the past 12 months in the number of employees asking for advances on 401(k) funds.

  • 26 percent increase in the number of employees with wages garnished by collection agencies.

  • 20 percent increase in those asking for advances on their wages.

Survey researchers also asked whether respondents’ companies offered various types of financial management training or services to employees.

The most common types of education were one-on-one financial management sessions and courses on debt management, offered by 44 percent and 45 percent of companies, respectively.

About 28 percent of respondents indicated that their companies offer or plan to offer education about preparing for college education expenses. The least common offering involved preparation to purchase a home; only 19 percent of respondents said their companies offer or plan to offer such a course.


Worse Off Than Before

In a 2007 survey by ComPsych Corp., a Chicago provider of employee assistance programs, 1,136 employees from more than 1,000 client companies were asked how they would describe their financial situation.

  • 30 percent said, “I am worse off than last year, and one major setback away from financial disaster.”

  • 26 percent said, “I am worse off than last year, with less savings and income and more debt than before.”

  • 24 percent said, “I am about the same as last year, with no change in savings, income or debt.”

  • 16 percent said, “I am better off than last year, with more savings and income and less debt.”

  • 4 percent said, “I am in the best financial shape ever, with bountiful reserves and very little debt.”

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