Counselling an Employee with Debt Problems

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Debt in the UK is not just one of the many financial issues that popped up with the pandemic, it is a serious problem that has been there for decades now. Before the FCA stepped in, money lenders had gone beyond all reasoning with their impossibly high rates of interest on short-term loans, which was made possible due to the ever-increasing demand for short-term loans. They could charge 1,200% interest or more on the loan amount and still have applicants lining up for payday loans.

In 2015, caps were put on how much payday lenders could charge loanees, along with several other regulatory measures to somewhat mitigate a situation that was quickly spiralling out of control. Five years later, the pandemic broke out and people who were already in need of regular short-term loans were now more in need of the same than ever before. They were also joined in by countless new loanees who lost their jobs/sources of income during the lockdown and the consequent post-Covid-19 recession.

As should be quite clear, if ever there was a time to impart financial advice to keep anyone out of debt, now would most certainly be that time. If you are the kind of employer who cares about his/her employees and tries to keep them out of debt as much as possible, it is imperative that you act now. Taking a cue from some of the top financial experts in the UK, here’s a brief list of topics and suggestions for counselling an employee with recent or perpetual debt issues.

Establish a Line of Communication First

People are extremely sensitive about their financial information and there are laws to protect employees from being checked for financial competence. Therefore, practice caution and only bring up the topic after establishing a reliable line of communication with the employee first. While it is not likely that your employee will sue you for counselling them regarding debt issues, it still makes sense to first create a context regarding how you came to know about their financial woes. You do not want them to put up a guard around themselves, or the advice might not be specific enough to be useful for them. Be sympathetic and let them know outright how you got to know about the situation that they are in. As it should go without saying, this is meant to be a private session and it is of the utmost importance that you keep it that way.

Ask What Measures they have Taken Already

Once a line of relatively comfortable communication has been established, ask what measures they have taken to handle their financial problems already, if any at all. If they are looking for loans, explain the dangers of irresponsible borrowing from disreputable lenders and the sky-high interest rates they charge first. They should understand that these are not the types of loans that one can consider as a long-term solution to perpetual financial woes.

On the other hand, if they are in a temporary financial crunch on account of an urgent and unexpected expense, FCA-regulated short-term loans are certainly a dependable solution. Given that you are their employer, it should not be too difficult to judge whether the employee will indeed be able to afford to pay back the loan plus interest in time, which is part of what makes you the best possible person to advise them. If you are sure that their money troubles can indeed be solved or alleviated with a short-term loan, point them towards

Along with being registered with the FCA themselves, New Horizons also deals exclusively with FCA-registered and regulated money lenders. Not only will the credit brokerage help your employee with getting approved for the short-term loan that they need, New Horizons will simultaneously work towards getting them the lowest possible interest rate. Being a reputed brokerage in the UK, they won’t charge any fees for the services provided to your employee either, but instead, the company will get their commissions from the lending partner itself. 

If someone must take a loan, it should always be after comparing all their options first, rather than going with the first company that accepts their application. Only a credit broker can provide the option to compare multiple lenders and their quotes from a unified platform.

Ask Where the Problem Originated From

There are plenty of differences between someone who needs a thousand pounds to handle an unexpected but unavoidable car repair expense, and someone who has incurred a debt due to gambling. The main difference between the two is that the former was unavoidable and necessary, while the latter was avoidable and unnecessary. There is also another more worrying difference, which as an employer who is counselling his/her employee, you should be particularly wary of.

Common urgencies would be along the lines of expenses such as urgent home repairs or paying heavy insurance premiums in an already expensive month. These are expenditures that can be classified as justifiable, and certainly not as ones that anyone looks forward to incurring a debt for! However, gambling is not justifiable if your employee is incurring debts because of the habit. It might be indicative of the fact that they are addicted to gambling. In which case, they are indeed looking forward to spending more in the hope of winning millions. Given that most offline establishments in UK are not operational, they are likely spending money through online casinos and sports betting sites.

Pointing them towards GAMSTOP is the best possible way to help any employee who is incurring gambling debts. Once registered, GAMSTOP does an excellent job of keeping people addicted to gambling banned from most online casinos and bookmakers. They cannot block 100% of all gambling websites operating on the internet, but it’s still better than doing nothing. The very act of registering should help them realise that they have a problem, which they need to address before it becomes an even bigger problem.

Job cuts, pay cuts, and no holiday bonus are elements that have become par for the course this year in the UK, which is why the number of indebted employees and ex-employees is increasing. It is an unavoidable and unfortunate consequence of the pandemic, so it is only natural for workers to lose their morale. Debts on top of that can do even more damage to their psychological balance and ability to cope with everything that is happening around us. At this time, financial and mental support from the employer can do wonders for the morale of any employee who is feeling the pressure far too much. Although small businesses are having a hard time maintaining their workforce, even after the pay cuts and job cuts, it is still important for employers to pay close attention to their existing workforce. The British economy has slowly started to bounce back, and the holiday season can mean great things for a large number of segments. 

To take advantage of the coming season and the improving economy, you need a group of reliable employees by your side, preferably ones without crushing financial troubles weighing them down. Remember, a sensitive bit of advice can work wonders.



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Mike Miller

Mike Miller is a partner in B2BNN.