As the country moves into day 106 of the lockdown, there are concerns that South African employees are struggling with cashflow during the lockdown implemented to stop the spread of COVID-19 in South Africa.
Transunion pointed out in its first quarter South Africa Industry Insights Report (IIR) last month that demand for consumer credit remained high in the first three months of the year, likely because lockdown was only implemented towards the end of the first quarter.
The figures shows that outstanding balances continued to grow across all major consumer lending categories and was strongest for non-bank personal loans at 17.2% year-on-year.
Paymenow’s Head of Business Development, Bryan Habana, points out that Transunion’s research will only have included consumers with access to credit – it, by default, will have ignored those people who live-hand-to-mouth.
Co-founder and Paymenow Managing Director, Deon Nobrega says loan sharks use the dire financial situations to their advantage.
“This is the sort of space we traditionally see loan sharks paying in, offering consumers quick loans at exorbitant interest rates.”
Employers can help their staff avoid crippling loans through allowing them responsible early access to already earned wages; amounts of between R200 and R500 that will make all the difference when staff come up short before payday arrives.
There are several advantages to early access to wages:
1. Employees can avoid being stuck in a debt trap, which is a seemingly never-ending vicious cycle of escalating interest payments. Illegal money lenders are also known as “mashonisa” and they charge consumers extremely high interest rates. In some instances, loan sharks resort to violence and intimidation when collecting outstanding debts.
2. Work productivity is improved: Offering your employees financial assistance when they require it boosts their happiness and focus at work.
3. 50% of financially stressed employees spend three hours or more at work each week thinking about or dealing with personal financial issues. If a staff member is worrying about their child’s upcoming school fees payment, chances are that that’s all they’re doing – worrying.
4. It’s estimated that more than 70% of doctor visits are due to stress-related health problems. And 55% of stress is money related
Research has shown that staff away from the office because they are ill should run to about 1.5%, or 3.75 days per 250 working days per year. However, most South African companies have an overall absenteeism rate of between 3.5% and 6%, which means that industry loses R16 to R19 billion in productivity each year.
5. Offering a benefit to improve employee financial health and security helps retain and attract high performing talent
A salary advance is a low-risk option that current, and potential future, staff will really appreciate.
Now that most companies are rolling back perks and benefits in a bid to reduce costs, offering your employees the benefit of financial assistance in their time of need will really give your company an edge over its competitors in terms of recruiting and retaining new and existing employees
6. Shows that you care about employee welfare
When you offer staff financial assistance through responsible early access to already earned wages, you also contribute to their financial wellness. In turn, this does amazing things for a company’s image, brand, and social standing: it shows that you care about your employees enough to offer them that benefit.
7. Employees who are financially stressed are more prone to theft in the workplace
Stress related to a staff members’ individual or family financial situation may tempt a desperate employee to steal from an employer. This can result in a direct cost to employers.
Habana says offering employees an advance on wages already earned will, therefore, not only protect your company, but also bolster productivity, and is a win-win all around.