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There are so many questions which come to mind when you think of attracting and retaining employees. Are you able to budget tempting employee perks while meeting your working capital restrictions? How to make your employees’ life easier and build their loyalty towards your company? Have your employees approached you for loans? If any of the above questions resonate with you, then you need to read below.
In light of the increasing rate of urbanization, a fresh influx of MNCs along with an ever-growing need for higher productivity has led to an intense war for talent. 46% of the employers in India said that shortage of talent will affect their business in the next 12 months. So, again the question arises how can employers push for commitment and productivity while at the same time avoid getting trapped in rampant salary inflation?
To lure the best and brightest professionals, employers need to offer pay and benefits that are able to attract them in the first place. This is especially important when you’re competing against the Googles and Facebooks of the world. Studies show that 75% of the total employees are more likely to stay with an employer who provides good benefits. Companies offer attractive benefit packages that involve taking care of illnesses to wellness of employees.
In a recent study conducted by PriceWaterhouseCoopers (PWC), it has been projected that 52% of working adults stated suffering stress from financial difficulties while 46% of employees find it difficult to meet their household expenses each month.
Enterprises can help keep up the financial health of their employees by assisting them when they face cash crunch situations. By providing employee loans, employers can address financial needs of their employees. Cogxim’s Vaanijaya is one such financial management software that is beneficial to companies. Vaanijaya helps businesses manage their expenses, assets, income and much more.
Enhance company reputation as an organization which cares about employees
Contribute towards employee retention and diminish attrition rate
In today’s market, which loans can be sold as real benefits to employees?
As per industry trends and analysis, traditional loans such as car, home, marriage, travel, etc. are not viable from a value viewpoint, and would end up creating a financial burden on SMBs in India. Even giants like Infosys have stopped offering such loans citing their non-value addition and in order to cut costs. These days due to evolution of the market, people can easily procure such loans.
Personal loans: Organizations pitch in with personal loans for employees to enable them deal with emergency financial burdens. Employers set a limit on the eligibility amount for the loan as per the financial health of the company and yearly remuneration of employees. Employees can repay these loans through payroll deductions over a specified period of time. Personal loans are viewed as a value addition for employees as one can easily suffer from financial distress related to marriage, child, parent or medical care, house maintenance expenses, etc. Companies offer personal loans at zero percent or a minimal interest rate compared to market rates for personal loans which are usually very steep.
Student loan contributions: Many corporates and MNCs, including PWC are helping their employees pay off their student loans. As per data released by Reserve Bank of India (RBI), outstanding student loans in India jumped from ₹2,986 crores in 2003 to over ₹48,400 crores in 2012. Due to the boom in educational loans and the persistent need for upskilling, a vast majority of millennials in India have been burdened with debt before they even enter the workforce. By having a strong financial management solution in place, employers can help their employees make informed financial decisions thereby securing their future. This would help boost employee morale and productivity. Moreover, the company would also reap benefits in their talent recruitment and retention efforts.
What kind of groundwork does an employer need to undertake before giving out employee loans?
Before disbursing loans to employees, employers need to:
Set the right limit and interest rate
Perform an affordability assessment of the employee
Make it formal through a promissory note to repay the loan
Document loan policy and other pertinent records
Having a strong benefits and wellness package acts as a highly effective tool for retaining employees. And if the employees are happy with procuring loans from their employers, they are more committed towards their company.
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