If you have ever had an employee ask you for a payroll advance, you know it can be a difficult and even awkward situation. You do not want to lose a good employee, but you also do not want to become a personal lender with all the entailed risks. And if the employee catches you off guard, you are much more likely to make a hasty and not-necessarily-wise decision.
Wouldn’t it be helpful if you could know ahead of time when an employee is about to ask you for a paycheck loan so you can be prepared with a well-thought out response?
Well, we can’t promise you that the following employee actions are definitely precursors to a request for a loan. Taken individually, they may not even indicate financial troubles. However, if you notice an individual employee taking two or more of these actions, you can be pretty confident he or she is going through some serious financial struggles.
Here are seven signs you should stay on the lookout for, in alphabetical order, when it comes to financial issues your employees are facing. After all, in spite of them being “personal” finances, if they impact you or the company, they are no longer personal.
1. Asking your thoughts about financial matters: Whether your workers asks your option about high-risk investments such as bitcoin, outright scams like purchasing Iraqi dinars securities, the latest multi-level marketing fad, or even online social lending sites like LendingClub.com or Prosper.com, you may have an employee who is looking for a quick fix to some financial problems. If he or she cannot figure it out soon, a paycheck advance may be their next thought.
2. Donating Plasma: Whether they speak about their experience at a local plasma donation center aloud or you notice that they are showing up at work twice a week with a colorful bandage wrapped around their arms at the elbows, your employee is likely “earning” money by donating plasma. Is this a serious issue for you to worry about? Maybe not. However, consider that the employee is taking between 50 minutes and 2 hours of personal time to lay on a donation “bed” to get poked with a needle, tapped for whole blood, and resupplied with the non-plasma components for the equivalent of 3 to 10 hours of minimum wage. And they are probably doing this twice a week. It may be good money, but most people don’t do it because of a fear of needles, the physical discomfort, and the long-term scarring that can occur on their arms. For someone struggling with bills that won’t be covered by their paycheck, however, an extra $50 to $80 a week can be a huge motivator.
3. Downsizing his or her vehicle: While it may be a simple case of reshuffling priorities and learning to do more with less, an employee that trades down a nicer car or truck for a smaller, less luxurious or less sporty vehicle is possibly going through some financial struggles. This is more likely if his or her previous vehicle was one that seemed above their income. This is not to suggest that you should prowl the parking lot looking for employees living above their means. After all, we Americans love our cars and trucks and consider them almost family. However, when you notice such changes, be aware also that a member of your team is probably struggling financially to stay afloat.
4. Driving for Lyft, Uber, or delivering for Amazon: What your employee does with his or her time after (or before) hours is truly their business. However, unless they really love driving and constantly meeting new (and sometimes grumpy) people, your employee that has recently started to earn money off hours providing ride share or food delivery services is quite conceivably needing the extra cash to fix an underwater household budget. After all, they are likely making two to three times the minimum wage with the flexibility of working the hours of their choice. If they don’t ask for a payroll advance or raise, they may be looking for more fulfilling or less stressful work.
5. Obsessing about the Lottery: When PowerBall and MegaMillions hit record highs, it is common (though never wise) for a large percentage of your employees to get excited about playing. They may even form pools to purchase large numbers of tickets. However, if you have a worker who is constantly preoccupied with winning the lottery, you likely have a worker that needs some financial education or even counseling. At the very least, they are likely flirting with an addiction. At best, they are wasting their money.
6. Opting out of your organization’s 401(k) or 403(b) plan: Perhaps your employee has opened an individual retirement account and prefers to direct his or her own investments. This may be the case, especially if your organization does not provide any contribution match. However, it can more often than indicate that the employee needs that extra $50 to $500 a month back in the paycheck to pay recently incurred bills.
7. Receiving collection calls at work: This one seems like a no brainer. If you hear of or notice an employee taking phone calls from bill collectors while on company time, you not only have a client struggling with his or her personal finances at home, but you also have a much less productive employee at work.
You have plenty on your plate to worry about if you are a department or business leader. This is perhaps the number one reason most leaders avoid getting involved in their employees’ personal finances. Keep in mind, though, that finances are only “personal” if they remain so. Once an employee starts asking for payroll advances, seeking personal loans from the company, or using work-time to deal with bill collectors, his or her financial issues are now, like it or now, also your financial issues. Preventing these issues from reaching a point that they negatively affect the company should be a concern of all business owners.
If you are already at a point where your employee has asked for an advance or loan, check out our previous blog on payroll advances and financial education ideas.