Workplace Savings Viewpoint: Debt management

Taking full advantage of the benefits available from their employer can help employees keep their finances under control, says Keith Tondeur

Over the years, many people have said to me that despite being offered generous benefit schemes by their employer, they just can’t afford to join them.

Sadly, this is a reflection of the short-termism that has increasingly dominated our lives over the last generation and has led many people into the pain of over-indebtedness and a lack of consideration of their long-term future.

Many make rash purchases today without considering the needs of tomorrow. Of course, it is hard to think ahead when you are young and your living standards are being squeezed, but with a little planning and reining in of unnecessary spending, many of us could look forward to a much better life in our old age if we took full advantage of the benefits employers are offering us.

Starting young and increasing involvement in such schemes over time is a great way of building up reserves for the future. The tax incentives given by successive governments to encourage us to do so are even more of a reason to take full advantage of some of these options.

Offering these perks helps both employer and employee. The employer benefits from increased staff motivation and the likelihood of higher productivity and reduced employee sickness. By offering a scheme to all staff, employees gain from economies of scale, can readily receive communications about the value of their benefits and know where to go for help if they have any questions.

Differing priorities

Benefits come in many forms and if we think through our priorities, which may differ according to age or family circumstances, it should be fairly easy to see which are the most important for us.

The most common benefit is a pension. With the closure of virtually all final salary schemes, pensions may not seem as attractive as they once were, but it is still key to join one. An increasing number of us are realising the state pension will cover only the very basics and, as we’re all living longer, will result in a very hard later life. Employer contributions and tax benefits mean that contributing to a company pension scheme is highly sensible.

Another method of saving that has grown in popularity is the individual savings account (Isa). These benefit all sections of the workforce. Higher earners affected by tax restrictions on pension benefits find Isas useful to continue their saving. Younger staff want greater flexibility early in their career and often reject pension saving at that time, perhaps because they have high levels of debt after education.

Share ownership

It may also be possible to offer employees participation in a share ownership scheme. Malcolm Hurlston, chairman of the Employee Share Ownership Centre, says: “Employee share ownership is making a deserved comeback in the popularity stakes. It serves not only as a business succession tool, but also as an incentive to encourage better performance and higher productivity, giving employees a share in the profit-generating capacity of enterprises.”

Many employers offer other benefits that can be mutually beneficial. Healthcare and wellbeing are increasingly common and some employers offer free or subsidised gym membership or health insurance and regular check-ups.

This should help prevent illness, but if this does occur, employers may also offer critical illness or income protection assurance.

Another possible benefit for employees is being able to buy products or services at significant discounts. This will probably cost the employer nothing but could be a real incentive to persuade key workers to stay on board.

By offering such incentives, employers benefit from a happier and more motivated workforce that is keen to see the organisation prosper – which, of course, in times of high unemployment is of special and mutual importance.

Employees feel they are valued, that they belong and that their employer cares about them. By taking full advantage of as many benefits as they can, they are building up as much protection as possible for the years ahead.

Keith Tondeur is president of national money education charity Credit Action

Read more from the Workplace Savings Quarterly