Earlier this week, it emerged that betting company Betfred is offering its 10,000 staff short-term loans of up to £1,000 per year.
Employers offering loans to their staff is nothing new, and particularly at a time when some lower-paid staff are struggling to make ends meet, these can be a valued benefit.
But, unlike many of the interest-free loans offered by employers, Betfred’s offering attracts 39.99% APR on the value of the loan. While this is nowhere near the sky-high levels of interest charged by payday loan companies, this is still higher than the interest rates charged by many banks and building societies on the costs of loans or even some credit cards.
Of course, in some instances employees will not be eligible for these loans or credit facilities, so any help their employer is able to give them may get them out of a difficult situation.
But, I’d be interested to know what happens if an employee is unable to meet their repayments? Is the amount owed taken from their salary? In which case, what happens if that then adds to their financial difficulties?
We know that employees often rely on their employer for financial guidance and support, so should more employers offer schemes such as short-term loans?
And if they do so, should there be standards around what they are allowed to charge in terms of interest levels, for example? Should they even be charging interest at all?
So, should more employers offer more financial assistance to employees who need it? Or would it be safer for all concerned for employers to stay away from this altogether?
Lots of questions – which I don’t have the answers for. I’d love to hear your views.
Debbie Lovewell-Tuck
Editor
Tweet: @DebbieLovewell
On one hand you might think this is a good idea – especially as it might help employees to avoid the traditional high interest payday loan firms but is it really?
By applying for a loan will the employee highlight that they might have financial / debt issues? Will this change their employers view of them? Will employees feel comfortable with their employer also being privy to their financial dealings?
No doubt the loan is governed by a credit agreement (the £1k is significant) so in theory the employer could end up taking legal action against an employee to recover monies – hardly condusive to a harmonious working environment!
Lastly lets also consider that an employer can offer an interest free loan so charging interest is notable here – is it to offset losses or do they see it as geerating profit? If an employer truely cared about financial wellbeing would they not offer interest free loans or a hardship fund?
What seems like a ‘kind’ idea leaves me feeling a little uncomfortable