Walking A Financial Tightrope
While employee wellness has been a popular theme for a while, employees’ financial health is probably the most fundamental issue currently affecting workplace productivity. This unmeasured cost to a company can be staggering, which is why Smart Money and other employee benefits companies are focussing on this problem.
Momentum has estimated that this factor alone may cost South Africa up to 10% of GDP in lost productivity. This is evidenced by a 2% loss due to absenteeism as well as 8% in what they call presenteeism (employees not engaged in the workplace owing to external factors).
The statistics relating to the financial position of individual South Africans are a huge concern and validate the alarming estimates in the cost to the GDP. The individual debt to income ratio is estimated to be 73.4% and an estimated 11 million South Africans are behind in credit installment debt. This is clearly unsustainable and also impacts on the ability of South Africans to retire financially secure with only 6% of retirees currently able to do so.
With a savings rate of about 15% of GDP South Africa rates among the lowest in the world with countries such as China and India, where salaries are lower, still recording savings rates of 50% and 30% respectively. We have clearly developed a “live for today” culture and constantly walk a financial tightrope (in 2017 the Reserve Bank reported a 94% year-on-year increase in the number of fixed-term unsecured loans (personal loans with a 6+month term).
Unfortunately living paycheque to cheque has become an accepted way of life, but unexpected expenses cause people to slip deeper into debt and create more financial stress and workplace distractions.
It is apparent that there is no quick-fix solution to address the problem as it requires a change in people’s behaviour. In response to this, Smart Money have developed an employee financial management and budgeting programme which is delivered through face-to-face workshops backed up by online tools and content and importantly supported by financial coaches who interact with employees face-to-face.
To be effective companies typically subscribe to a 2-year programme for their employees to ensure that they are able to develop good habits and ensure meaningful progress. The programme facilitates a change in behaviour by demonstrating how employees are able to achieve quick wins that encourage them to implement further good habits.
The Smart Money Programme helps employees have a clear plan of what they need to do (to) reduce their debt, save for emergencies and ultimately save thousands of Rands which they can then better apply to build financial wealth.
While employee financial health should be a major concern to companies, Momentum report that the take up of these kinds of programmes are still concerningly low at 42%. Momentum produces an Effective Employee Index score for individual companies to measure if the programmes are working which effectively validates the process.
Smart Money also provides information to companies that reveal the extent of the problem within their workforce and monitors what progress is made over the programme period.