Are you a small business looking to save costs on the onboarding process due to the large number of talents leaving your organization now and then? We’d be giving you an insight into what no one else is doing to help you get ahead of the game and end your talent retention worries.
It’s not news that the competition for the best hands is getting more challenging. Most companies focus on curating attractive benefits packages to improve employees’ physical and mental wellness. However, they need to pay more attention to the most critical aspect of their employees’ well-being; financial health.
One way to improve financial wellness is by providing employee loans. This would help employees navigate through emergencies by providing the financial security they need. In this article, we’ll discuss employee loans and how they can improve employee loyalty. Let’s begin.
What are employee loans?
Employee loans are a type of loan that employers provide for their employees, usually payable on a payroll deduction basis with little to no interest attached. Sometimes your employees are dealing with financial-related issues such that they might find it difficult to resort to family and friends for help. Employee loans offer them the option of borrowing from you.
Taking regular loans is a dicey process, and this is for so many reasons. First, you must deal with high-interest loan apps that are usually limited in how much you can borrow. Then you would also have to deal with delays in the disbursement of funds and unfavorable repayment conditions.
Your employees may require loans to help them pay for personal expenses, such as a home purchase or school tuition, or to get through a tough financial time. Having an employee loan option would be a great way to differentiate your business as one concerned about every aspect of its employees’ lives, increasing your employees’ loyalty.
Types of employee loans
The next step after understanding what employee loans are is to explore the options available to you in terms of funding this benefit. Typically, there are two ways businesses can offer employee loans to their team;
1. Employee loans by employers
Employers directly funding the loan they offer is the most common way of providing this benefit. Here, the employer decides the terms and conditions of the loan, the interest rates, and the repayment periods, which can differ substantially.
But this sort of financing is a common practice for large organizations with a lot of cash and might not be suitable for a small business like yours.
2. Employee loans by third parties
Recently, many businesses have partnered with third parties like Earnipay and other employee benefits providers committed to helping small businesses maximize their capital. As a small business that wants to offer this benefit, you probably need more cash to keep your business afloat, much less tie it down on employee loans.
By signing up with companies that offer this type of loan, you can offer this benefit without hurting your cash flow.
How offering employee loans can help your business retain employees
Employee retention should be your top priority as a business owner because having your employees leave now and then makes you spend on onboarding and can also affect your workflow. Employee loans offer a lot of benefits to your business and your employees as well. Here’s how;
Mitigate Financial Stress
It is common knowledge that financial stress can hurt your employees’ overall well-being and performance. According to a study by the International Foundation of Employee Benefit Plans, 60% of respondents who experience financial stress said their anxiety kept them from concentrating at work, and 34% said it made them more absent-minded and tardy.
General debt, medical expenses, education costs, or even basic living expenses are examples of financial stressors. Offering employee loans is a great way to relieve your teammates from the stress of worrying about money.
When people worry about money, especially when their needs are pressing, it isn’t easy to concentrate on anything, including their jobs. However, lending to your employees in times of need can be a great way to keep them motivated and more productive at work.
Low-Cost financing option
Compared to regular loans, employee loans are a better option due to the considerate interest rates and ease of repayment. In addition, deductions are made from their salaries every month; they can focus on other things instead of worrying about growing interest rates or responding to threat messages from predatory loan apps.
Improve business reputation
Employee loans can help improve your employees’ loyalty, and since people are unlikely to leave when they feel valued and appreciated, you’re less likely to have them go. Once your business is known for being employee focused, your reputation skyrockets, which gives you a competitive advantage in the labor market.
How to get started today!
Employee loans are a viable means of helping your business stay relevant and retain talent. However, if you’ve hesitated to adopt this benefit because your business needs more cash flow, you can contact us at Earnipay today to help you get started.