Hackney decided to be the first local authority to launch salary-linked employee loans in December 2016. In its first year the solution, provided by Salary Finance, has truly changed people’s lives. This case study forms part of the wellbeing and inclusion resource.
The HR team at Hackney Borough Council recognised that employees had received below inflation pay rises for the past few years and were under constant pressure to finance their personal lives.
In response, Hackney decided to be the first local authority to launch salary-linked employee loans in December 2016. In its first year the solution, provided by Salary Finance, has truly changed people’s lives.
Over 100 employees are currently benefiting from the offering and saving close to £110,000 in interest costs. In addition, the solution provides necessary and important financial education as well as tools that help them to start saving.
This case study forms part of the wellbeing and inclusion resource.
The challenge
With over two million people in the UK taking out high cost loans each year and the average individual debt hitting £8,000, stress and anxiety arising from financial worries is also on the rise. In London, where the cost of living is now ranked the second highest in the world, this is problem that faces many people trying to progress in their personal lives.
Hackney Council know that the past few years have been ones governed by austerity, and employees have experienced below inflation pay rises for some time. Financial burdens of rising credit bills and the inability to save for a more secure future, weighs heavy on the minds of many of their 4,300 workforce and can directly affect their wellbeing both at home and at work.
Promising to always look for innovative employee benefits, the HR team were looking to offer any help they could to stretch take-home pay; steering employees away from payday loans or overdrafts, and offering them the opportunity to improve their financial wellbeing.
The solution
Salary Finance have created a range of innovative salary-linked products that improve people’s finances, helping them to become debt-free and save towards their financial goals. At no cost to the employer, their simple employee loan solution was the perfect choice; but when also underpinned by their transparent social purpose and education-based support, Salary Finance became a very unique financial partner.
Introduced in December 2016, the Salary Finance scheme takes loan repayments directly from salary via payroll. Taking deductions via payroll means Salary Finance can use a wider range of criteria than most lenders when reviewing loan applications. This enables employees to borrow at a lower interest rates than with other lenders. It also allows employees to borrow money, even if they have a low credit rating, with checks to ensure responsible borrowing.
The manageable repayments are also deducted directly from payroll, helping with budgeting and affordability. Adding an arduous deductions process could have daunted the council’s payroll team but the set-up was quick and easy, with research, design and implementation all accomplished in just a few weeks.
The impact (including cost savings/income generated if applicable)
Hackney have now been up and running with Salary Finance for a year and are delighted with the outcomes:
1,170 employees (27 per cent of the workforce) have engaged with Salary Finance website since launch, and over 215 employees have applied for a loan at an average of £3,875 per borrower.
Based on the credit file of applications received, the average rate in the market available would be well over 30 per cent APR. Therefore, based on applications received, the Salary Finance solution is allowing employees to reduce their high-cost loan repayments and save over £110,000 collectively. This equates to an average saving of £1,030 per employee.
It’s in the real lives of Hackney employees that the solution is having the biggest impact:
“I’d been living in my overdraft for a few years, and it was really starting to get me down. I looked at the big banks, but the interest rates seemed quite high and I wasn’t sure if I could manage it, or if they would even accept me. Using Salary Finance has been a massive relief for me. Now I’m out of my overdraft and I’ve recently started looking at saving.” Marianne Hernandez, Social Worker
How is the new approach being sustained
Salary Finance’s expertise in financial technology and application, means they can provide a unique level of support to improve employee financial health and education. This is available to all employees, not just those that have taken out a loan.
For example, in the cases where loans are not granted, Salary Finance have helped the employee to access a credit score report and coaching on how they can improve their score. They also introduce people in serious financial difficulty to debt charities to assist with advice and will help in starting their progression out of debt.
Alongside this assistance, Salary Finance also have a suite of financial wellbeing solutions to help employees with budgeting and financial literacy through comprehensive, free financial advice and articles on their innovative financial wellbeing hub.
Lessons learned
Talking about your debts at work is generally taboo, but it’s safe to say you can’t measure true impact of a financial solution without discussion. With this in mind, Hackney Council employees have been openly invited to discuss their situations after working with the scheme, and some have even been happy to provide video testimonials. This is now used to present to others who may be suffering financially as something they too could access and not be ashamed to discuss.
Another lesson has been that, by helping employees free up more of their income, there is a duty to also provide them with options on safeguarding some of that money for their future. Salary Finance has just launched a new savings product that makes it easy for employees to build a savings habit by depositing in a savings account direct from their salary.
Contact
Verity Buck, Client Director at Salary Finance
Email: [email protected]
Tel: 07972 101805