Companies offering debt relief solutions to their employees ensure a happy, productive workforce
It’s still early enough in the year to review your spending habits, getting your finances into shape and implementing a financial plan that will ensure you get back on track.
According to the 2019 consumer credit market report carried out by the National Credit Regulator, 59% of employees are stressed about their finances with less than 15% of South Africans able to afford retirement. Additionally, 49% of South African consumers are more than one month in arrears with an account and consumers spend more than 72% of their income on debt repayments. This leaves very little wiggle room in the disposable income department and makes saving almost impossible.
This particular conundrum affects employees across the board and has a negative impact on productivity and efficiency in the workplace. The question therefore begs whether employers put sufficient effort into creating programmes that educate, mentor and equip their employees to take control of their finances? There is a school of thought that believes it is not the employers’ responsibility to help out in these personal arenas, but, according to Alfred Ramosedi Chief Executive Officer at Bayport Financial Services, how can we not help them?
debt, in today’s economy, is not easy to manage. The problem is exacerbated by the ease with which people are able to access credit and, by extension, how they use that money. Funding a lifestyle on credit is dangerous, as it only takes one mishap to get you into trouble. People are living from paycheck to paycheck and are indebted to the point where their income barely covers monthly repayments. “Funding a lifestyle through credit becomes a really bad decision when you perhaps don’t get the raise you expect, the bonus you were counting on or, worst of all, lose your job,” says Ramosedi.
“When you lose your income security you are immediately in a bad place. If you are living hand to mouth to service your debt, there is no breathing room at the end of the month should anything go wrong. This is probably the time when you would really need a loan which formal credit channels will often deny and the only recourse some people have is to make use of informal lenders – loan sharks – that are unregulated and cause more stress and heartache than they are worth. The anxiety associated with being indebted to unregulated, and often unscrupulous creditors affects an individual’s mental attitude, well-being and ability to concentrate on work.”
It is with this in mind that Bayport started Bayport Money Solutions, a business unit that helps employees, not only within the Bayport family, but those of its corporate clients, who need assistance to get back on a sound financial footing based on Bayport’s extensive financial wellness expertise and ability.
“There were a number of employees struggling with their financial health and getting deeper and deeper into trouble. As we went through the process we started understanding how little knowledge people had of the options available to help them get back in the black. Almost all of them immediately go under administration or place themselves under debt review. This is not always an ideal position to be in unless you have major assets you wish to protect. Unfortunately, there are very few tools in the marketplace to help our distressed population when things go bad. We define three different categories of indebtedness; those in good standing with creditors, distressed individuals, and the over-indebted. The issue with the over-indebted individuals is that they are blacklisted on credit bureaus. When we started vetting our own staff, we explored various methods to address their needs and finally came up with a pragmatic solution that worked so well that we have extended the service to other corporates.”
This initiative should actually be more of an imperative than an elective. To illustrate the gravity of the problem facing the country it must be understood that, currently there are 26 million active credit users in South Africa, of which only 16 million are formally employed, and only eight million work for VAT registered companies. Close to 50% of these are at least one month in arrears with one of their payments. “This doesn’t mean that the remaining 50% are not under pressure,” notes Ramosedi. “There is very little disposable income even with those who have a good credit rating and are in good standing with their creditors. Essentially, at any company, if you look closely at your staff, at least six out of 10 will be struggling to make ends meet financially each month. This is across the board from entry level positions to management.”
The Bayport solution goes beyond mere instruction. It delivers real benefits to people in financial turmoil. “Our initiative goes beyond hype and education; we offer tangible, measurable interventions. There are numerous company wellness programmes but many of them are merely lip-service as opposed to concrete methods and financial support that deliver results. Rather than just telling employees what they should be doing, and leaving it there, we get actively involved in the process. Take diet and exercise as an example: everyone knows what they need to do to stay fit and healthy, but not many people put on their gym kit and get on with it.”
To activate this solution, Ramosedi says the first port of call is to get the employer on board and get buy-in from all levels of management. “This has not been an issue thus far as the companies we are engaging with, many of which are preferred employers, understand the value of ensuring the well-being of their employees.”
“This typically means we bring the product on-site, and place qualified coaches on-site. Should the company in question not have space for our team, we have digital capabilities and channels where we can still reach out to employees on a personal basis. Through this process we have created an engagement model for people who are experiencing financial stress. These are individuals who could never approach a normal lender and get help but we look at them holistically, and, should we offer them a loan, we commit to ensuring they follow the path to financial wellness. We don’t just supply a credit product, we offer an all-inclusive service. Essentially, we create an individual financial roadmap for the customer, defining their current position and plotting a way forward. These are functional solutions for almost every situation and results can be seen almost immediately. We guide people to get them out of judgements, clear black-listings, and formulate an affordable and realistic payment plan that doesn’t cripple the debtor.”
Apart from helping individuals to become financially secure and more productive, Bayport is creating sustainability within the credit industry at large. “Society needs credit-active people. This is the way the world turns. But this needs to be done through formal processes with repayments that are affordable, which will in turn, enable personal growth and wealth creation. Unless you offer real solutions to everyday problems the market will implode,” Ramosedi concludes.Go back