HR Hero Line

Helping Workers Deal With Financial Stress

The current recession has taken its toll on the United States, and many Americans are still fighting to stay financially afloat.  Consumer confidence is down. According to the American Bankruptcy Institute,  consumer bankruptcies rose by  24 percent nationwide in August from the same period a year ago, and during the first six months of 2009, the total number of U.S. bankruptcies increased by 36 percent from the first six months of 2008. RealtyTrac, a provider of real estate data, reports that foreclosure activity in the U.S. increased nearly seven percent in July from the previous month and increased 32 percent from July 2008. And if you live in California, Florida, Nevada, or Arizona, you’re in the nation’s top four in the number of foreclosure filings.

No matter where you are, you probably work with someone who has been touched by a mortgage foreclosure or other financial problem. How does the U.S. and regional economy affect your staff, what does it mean to you, and what can HR do about it? There are steps you can take.

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How employees’ budgets affect businesses
It’s tough to quantify what stress over financial problems can do to employees and a business, but it undoubtedly hampers productivity. When employees worry about financial problems, they may spend their work hours fielding calls from creditors, talking with friends and spouses, or cruising the Internet for solutions. They may need time off to talk to lawyers and attend court hearings. Financially strapped workers may be moonlighting and losing sleep, making mistakes and accidents more likely. Other workers may pick up the slack, causing resentment.

In the worst-case scenario, employees with money problems may be pilfering or embezzling from the organization. Even in the best-case scenario, they may not be concentrating on the job, lowering productivity and potentially causing accidents.

Let’s say Samantha, usually a good employee, has been spending a lot of time on the phone in hushed tones. You notice a worried look on her face and that her work isn’t up to par. When you see a performance problem, you need to take action, whatever the cause. Counsel her over her time on the phone, following your disciplinary policies. Follow up if necessary, and be consistent to make sure you treat her the same as other similarly situated workers. Showing some flexibility can also help, perhaps by offering a change in hours or suggesting that she make personal calls on break or during lunch rather than during work hours. Fairness and empathy can help improve morale, create loyalty among employees, and result in an organization people want to work for.

Audio Conference: Keeping Employees Engaged: HR’s Vital Role During Tough Economic Times

When employees seek help
If Samantha volunteers that she’s having problems paying her mortgage, for example, refer her to your employee assistance program (EAP) if it provides legal or financial counseling. You may want to refer her to other community services such as a United Way hot line that can direct people to agencies that may be able to help.

Say Samantha asks for a loan or an advance on her salary. If your company has a written policy on loans or advances, follow it and document your actions. If it doesn’t, talk with your attorney to be fully aware of any precedent you may be setting; you don’t want to be accused of discrimination by lending to Samantha but not to Sarah or Steve. Remember to act consistently with past requests from employees for loans to prevent accusations of favoritism or discrimination.

Contact an attorney to make sure you have a written loan agreement that documents the loan amount, duration, interest rate, and other terms and conditions. Your employee may be close to bankruptcy; make sure you understand the risks in lending. Once she files for bankruptcy, you’ll be limited in what you can do to collect the debt. You also may not fire her solely for filing for bankruptcy protection.

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Maybe you’ll receive a garnishment notice from one of Samantha’s creditors. Check your state’s laws regarding your obligations as well as federal laws designed to protect debtors.

EAPs and financial literacy
You may want to supplement your EAP so it offers financial and legal counseling. The Employee Assistance Professionals Association, citing a 2002 study presented to the American Psychological Society, reports that when legal/financial EAP services were provided, work productivity was improved in 36 percent of the cases. Make sure you effectively communicate your EAP’s offerings so employees can take advantage of them.

Even short of an EAP, you may be able to provide informal seminars or brown-bag lunch presentations to educate employees about money management. Be cautious in selecting presenters to make sure employees receive education, not a sales pitch.

Finally, set a good example for other employees. Be respectful in talking with employees, and try not to pontificate on the virtues of living within your means and the evils of credit-card use. Don’t comment disparagingly on how others choose to spend their money, and don’t assume that others agree with you that something is cheap or affordable. Flaunting material possessions isn’t a good idea. Focus on your employees as people and on the skills they bring to the organization.

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