How to Support Employees With Debt – HR Solution

Talia Knowles | June 15, 2023

Edited by Hannah Locklear

As economic instability grows, American households have hit a record-high of $17 trillion in debt on average. This debt is a result of several types of consumer loans such as mortgage, auto, and student loans. Understandably, this causes a great amount of stress and fear for citizens burdened by this debt.

For business owners, employees stressed out about their family debt will undoubtedly show signs of mental fatigue at work, manifesting as poor health, inattentiveness, low-quality work, and burnout. To keep morale and work quality high, it’s thus in a company’s best interests to support employees through these troubling times.

A company can’t go around paying off its employees’ personal debts, but there are still other ways HR can support employees dealing with debt and make life easier for them. Below, we explore five different tips HR can use to help employees manage their current debt and focus on work stress-free.

1. Educate workers on debt management

The first step to helping employees is to empower them to help themselves by providing seminars and classes on debt management. These courses could cover topics such as how to prioritize debts, design a budget, manage spending, and consolidate debts, as well as other tips to help employees take control of their personal finances.

HR could run these lessons as mandatory company-wide training courses and seminars to give all employees an equal education while maintaining confidentiality. On the other hand, if you run a smaller company, it may be more effective to provide one-on-one consulting sessions to offer feedback and tips personalized to each individual’s needs.

2. Offer overtime

If they’re struggling financially, your employees may be desperate to work more hours and make more money. Companies can help their employees meet this goal by offering flexible overtime work and pay.

Not only does this allow workers to take home more money, but your business’s operations will also be running at a higher capacity for longer hours, bringing in more revenue to offset the additional overhead costs. Small businesses that can’t afford to hire more workers would especially benefit from offering overtime, as it allows more work to be done without having to hire and train more employees.

Concerned about balancing the books now that your employees are working odd hours at overtime rates? Luckily, payroll software solutions can help HR run payroll automatically and accurately every time. If your company is still manually running payroll or deliberating over which provider to choose, check out this payroll software comparison to help you pick the best payroll software for your business.

3. Offer 401(k) loans

401(k) savings accounts can help your employees save for retirement in the long run. Some companies may also choose to allow employees to borrow from these savings accounts for emergencies, also known as 401(k) loans. 

With a 401(k) loan, employees can borrow up to $50,000 (or half of the account’s balance, whichever is less) from their 401(k) savings without having to pass any credit checks or lender approval processes – instead, the employer, as the plan sponsor, sets the terms for the minimum or maximum amount an employee can borrow, the loan term, interest rate and fees, and other details of the 401(k) loan.

This gives employees an immediate source of cash to help them deal with emergencies, and could also boost overall participation in your company’s 401(k) program because of the reassurance this flexibility provides. As a caveat, though, employees who partake in a 401(k) loan will miss out on the investment gains they might’ve made if they’d kept the money in the account. 

4. Offer student loan assistance

Alternatively, if your employee base is mostly younger hires, there’s a chance that they don’t have much in their 401(k)s yet while having an outstanding amount of student loan debt. HR could address this issue directly by offering student loan repayment programs to help recent graduates pay off their student loans.

A company can either do this by providing matching contributions to the employee’s own payments, allowing employees to trade in their PTO or vacation days for student loan contributions, or simply providing recurring payments. Thanks to the current Consolidated Appropriations Act, employers can offer up to $5,250 of tax-free student loan repayment benefits annually through 2025.

If your company is looking to hire recent graduates, offering a student loan payment signing bonus would also be an attractive draw for potential recruits.

5. Establish employee assistance programs (EAPs)

Finally, employers can establish employee assistance programs (EAPs), work-based voluntary programs to help employees resolve personal problems such as mental health, familial issues, and, of course, debt counseling and management help.

Unlike our first recommendation on providing specific financial education counseling, an EAP provides resources and counseling for all aspects of an employee’s life, giving them holistic support to help balance and manage their life as a whole. For example, if an indebted employee can’t work more hours to pay off their debt because they have a child to care for, the EAP program would search for an open spot in a childcare facility that meets the family’s specific needs.

A company can either host their own in-house EAP specialist or outsource its EAP program to a third-party contractor. 

Once the program is established, HR should then announce to the company that the EAP is there to help employees with any and all issues, and encourage employees to take advantage of its free resources.

The bottom line

Debt may be seen as a taboo subject to employees, a source of personal shame that they shouldn’t mention in the workplace. But it’s only by bringing these topics to light can HR begin to grasp the whole picture of an employee’s debt and offer help. Together, HR and employees can work together to alleviate employees’ debt burdens, ensuring that they return to the workplace focused and ready to give it their all.

If your employee is being sued for debt, SoloSuit can help them respond to the debt lawsuit and increase their chances of winning 7x or more.

Watch the following video to learn more:

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