Almost 60% of domestic employers assume that the financial situation of their workers has deteriorated over the past quarter of a year, and 8% of employers even significantly. This was the result of a survey of 338 members of the Union of HR Specialists of the Czech Republic. How can employers help workers who are in financial trouble? And how is it that two-thirds of employers do not have an overview of the financial situation of their staff? On 22.06.2022, Radek Hábl from the Institute for prevention and solution of over-indebtedness, David Borges, Matěj Kučera from the National Institute of Mental Health and Martin Fortelný from Advanto responded to the results of the survey and questions from the audience during an online discussion.
Webinar recording available here
A survey among members of the Union of HR Specialists of the Czech Republic asked employers whether the financial situation of their workers had improved or worsened in the last quarter of the year. Around 59% of them replied that the financial situation of workers is deteriorating, of which 9% said that significantly.
"We all perceive how the prices of not only energy but also interest rates have risen sharply, which is subsequently reflected in high inflation. The situation is really not good, the influence of employers is very important and absolutely crucial here, and perhaps more important than ever before," Radek Hábl, founder of the Institute for the Prevention and Solution of Over-Indebtedness and author of the well-known Map of Executions project, responded to this finding.
David Borges, an expert on debt issues and an analyst at the non-profit organization People in Need, also thinks that more people will get into financial problems. "We are getting into difficult months, maybe even years. I realized that we would have to fight on two fronts. We still have more than 700,000 people who are in foreclosures, and now a completely new group of people who were not in them before and did not even have to take out loans are getting into trouble. People receive energy supplements in the tens of thousands," Borges explains.
Hábl added that surveys show that very few domestic households have savings just in case of unexpected expenses. "40% of households admit that they do not have savings greater than one or two salaries. 15% do not have savings of even one salary. If they don't have savings and they have arrears, they get into trouble very quickly," he says.
Financial problems are taboo in the workplace, this must change
More than two-thirds of employers do not have an overview of how their workers get along with money. According to Martin Fortelný, the head of Advanto, which was involved in the implementation of the survey, this is a problem. "We all know that aid works best when it's targeted. But employers cannot effectively help their workers in financial difficulties if they do not even know that someone needs it," fortelný points out.
According to Matěj Kučera from the National Institute of Mental Health in workplaces, there is probably no safe space to solve financial problems. "We come across this in research - we never ask about income in them, because especially in the Czech population we perceive that it is sensitive information and that when a person asks, he will encounter rejection in the largest number of cases," he says.
"We know that the vast majority of workplaces do not have an open culture, that in the vast majority of them they do not speak at the vertical level, that is, at the level between superiors and subordinates. When information is shared, it happens between colleagues. Colleagues will tell each other how much they take, but to tell my HR manager or manager how satisfied I am with my money, God forbid how I treat it during the month or that I have debts, so I think that is very sensitive information, and therefore the information does not flow there," adds Kučera.
People are ashamed to solve their financial problems at work, confirms David Borges "Shame is a fundamental topic. Many times, when offering advice in companies, we have encountered a situation where none of the employees came to hear how to deal with debts or executions. Logically, it turned out that no one wanted colleagues to know that they had problems. So we moved on to an individual approach. And we are very careful to tell HR professionals that we need to create a safe environment for employees. It should always be borne in mind that this is a sensitive topic," Borges points out.
Advances on wages or payouts at any time can help prevent falling into debt
The survey showed that one of the most common forms of assistance offered by employers to their employees is a salary advance. Around 38% of employers allow this option. However, the same percentage of them do not offer any form of help to prevent or solve over-indebtedness.
According to Martin Fortelný from Advant, advances on wages, or even better the possibility for it to be the worker himself who determines when he gets his worked money, is a very effective means of preventing people from having to borrow and at expensive interest.
Radek Hábl agrees with this. "A salary advance can help bridge an unexpected expense that needs to be paid immediately. For example, such a court decision or a payment order has a maturity of 15 days, which if you do not pay, you go into execution and immediately increase your costs by CZK 7,000," he says.
Hábl adds that the speed at which a payout can help at any time is also important in debt prevention. "People are getting stressed. Before Christmas, the client received a bill for energy, for which he did not have enough money. He called me in the evening that he didn't know what to do, that he had five children and didn't want to experience disconnection from electricity anymore. I told him we would sort it out in the morning. But he had already told me that he had solved it, that he had borrowed. If we could choose a down payment on wages, we would have time to set up a repayment schedule and solve it in a better way," recalls Hábl.
Teaching financial literacy is overestimated
One of the activities offered by employers to prevent or address over-indebtedness is counselling, including financial literacy training. However, according to Hábl, financial literacy is overestimated.
"I'm a little allergic to financial literacy because a lot of things are blamed on it. Let's not overestimate financial literacy, we have other problems and financial literacy won't pay our bills. There is a lot of research abroad. One meta-study published in the Washington Post summarized about 200 study results and noted that education in financial literacy affects an individual's future behavior in only one per thousand cases," Hábl points out.
Most debts are not due to rising energy prices, but to the phenomenon of a payday millionaire
Hábl adds that people know that they should save, but that consumerism wins over the will to set money aside.
"As far as we know, finance works like a dopamine booster or sprinter. So income on account triggers a rather complex reaction that can lead to happiness, but it can also lead to the fact that we fall into a certain dependence," Kučera explains.
"Advanta users tell us that they like to spread their payout into parts, perhaps over weeks, because they have a better overview of their income and expenses and thus eliminate the phenomenon of a payday millionaire, i.e. the desire to spend more after the paycheck, because there is a large amount in the account, and then to live before the payout," adds Fortelný.
According to Kučera, the so-called payday millionaire can really be a problem for some people. "The concept of money is difficult for the human mind to grasp. When you were picking apples from a tree, it was much more natural to take as many apples as you needed than to pick an entire tree and try to get along with it for a long time," he explains.
It is in the interest of employers that their workers are not caught by a debt spiral
According to debt expert David Borges, a significant proportion of people in foreclosures resign themselves to ever getting out of the spiral. "If I've been living in a grey area for a few years, I'm getting money on hand, I have x number of executions, I don't have property or a great perspective, I get used to it and it's hard to find an impulse to change my behaviour," he says.
"In the long term, there is talk of a factor of hopelessness from the situation - if a person falls into a long-term unpleasant situation from which he does not know how to get out, the primary reaction is submission, getting used to it, suppressing emotions, because in this way you can get distance from the situation and start reacting to it," adds Kučera from NUDZ.
According to Hábl, however, dopamine and payout at any time could help in this. "When people see their paycheck more often, they are also more motivated to go to overtime and work on weekends. Often people think that the unseizable amount is fixed. It's not. Money beyond the basic unseizable amount is only partially deducted. So if a person goes overtime in executions, he will also get extra money for himself. And if he gets them immediately, the motivation to work more can increase," says Hábl.
