Good employers should feel obligated to help their employees. They feel that they should help them improve their lives in terms of home and auto mortgage. However, not all employees are good borrowers. Sure, they are productive in the office. You can trust them with sensitive materials, but some people are not just great with money to the point that they have bad credit history and score even if they are not living ostentatiously.
Employers should, indeed, help their employees but never to the point that it will jeopardize the business. So, what happens if the employees are asking for help with their loans? They’re either asking if you can lend them the money as a kind of employee loan, or they are asking the company to guarantee the loan or a recommendation from you as the employer. How will you make sure that you are not going to be on the losing end when you agree to any of these terms?
Consider an Employee Loan, But with Requirements
You can consider providing an employee loan but only if they can comply with certain requirements. Similar to banks and other lending institutions, you should demand that your employees hold their positions for years before the loan becomes available to them. You cannot, of course, not impose interest rates on an employee loan. Compared to other lending institutions, you can impose lower interest rates as a benefit of working for your organization.
This is one of the reasons why employees want to work for bigger companies that provide employee loans. They can use these loans to finance their home or auto mortgage. Sometimes, they even use the loan for a small business that they want to start. Consider this benefit only if your business can afford it.
Organize Finance Management Seminars
If your employees have bad credit, there’s no way you can let them borrow from the company. They can try to check out car dealerships for bad credit if they want a secondhand car. But if this is the problem that your employees are facing, you can take matters into your own hands and give them a chance to handle their finances better. Part of your employee training program should be how they can manage their finances.
Finance management seminars will teach employees how to create a budget, stick to it, and even invest their money for the future. Part of these seminars is courses about investing their hard-earned money and building their assets portfolio. Retirement funds will also be discussed.
Write a Recommendation Letter Only If They Deserve It
Your priority should be to protect your business. Writing a recommendation letter to a lender for your employee means that you essentially guarantee that they wouldn’t go rogue on their loans. Before you do that, make sure that you have also reviewed your employees’ records. Do they have the capacity to pay the loans, or do they also have debts through an employee loan or even to their co-workers? Have they built a reputation for borrowing loans from their co-workers?
You are privy to this information because you are an insider. While it is not your business how your employees handle their finances, you cannot put your name and business on a piece of paper guaranteeing that they can pay the loan unless you are absolutely sure that they can. There are nonnegotiables in employee management, and the protection of the business comes above all of it.
Think About Promotion or Additional Jobs
Another way to help your employees is not to lend them money at all. If they are already earning enough, they won’t need to borrow, or they will be eligible for low-interest financing. Consider how many years the employees have been working for you already. Is it high time that they get a raise? Are they deserving of a promotion? Perhaps, an additional job can help them earn the money they need for their homes, cars, and family?
If your employees deserve a raise or a promotion, this is the best time to do it for them. You are going to help them earn the money they need and, at the same time, benefit from an increase in their productivity levels. Newly promoted employees are more productive than their counterparts.
While you need to help your employees any way you can, don’t allow yourself to fall victim to your employees’ bad finances. Above everything else, you have to protect your business. What you can do for your employees is to empower them through knowledge-sharing and better opportunities.