Author Topic: How to help an employee with massive debt  (Read 3239 times)

Simpleton

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How to help an employee with massive debt
« on: July 02, 2018, 08:09:52 PM »
Hi,

Looking for some advice from someone who may have gone through a similar situation to either myself or my employee. Specifically looking for Canadian advice here.

I have a long-time employee who has been with me for years. We had a discussion that concerned me. She brought up her financial situation. She has massive credit card debt. Long story short it needs to be consolidated as the $10,000 in annual interest on her credit cards are basically a prison at this point.

I cannot really offer personal help in terms of helping her consolidate this debt - I don't think that would be appropriate given our employer/employee relationship, but I am hoping to point her in the direction of a good service to do that.

I searched the web and found several sites like debt.ca which seem to have "service fees". For instance 5-17% of the consolidated debt. I am not sure if that is standard or just another predatory service.

Are there any services out there which are non-profit etc and solely looking out for the client? If you know of one please let me know.

I did tell her to speak with her bank about a LOC but she seemed confident they would not extend that credit to her.

Also, before someone says "give her a raise" - I will say she is paid above average for her position and tenure!

use2betrix

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Re: How to help an employee with massive debt
« Reply #1 on: July 02, 2018, 08:24:51 PM »
Glad you agreed “giving her a raise,” is not acceptable. That would be beyond unethical towards the other employees.

SunnyDays

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Re: How to help an employee with massive debt
« Reply #2 on: July 02, 2018, 10:12:11 PM »
Credit Counselling Society is non-profit.  She could also call up each credit card company and request a lower rate.  If she gets an initial "no," she should keep going up the chain until she gets a "yes."

Paul der Krake

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Re: How to help an employee with massive debt
« Reply #3 on: July 02, 2018, 10:20:06 PM »
Yeah credit card debt is relatively easy to negotiate. The lender just has to believe that the person is desperate and is at serious risk of not paying back.

https://www.creditcards.com/credit-card-news/help/8-myths-settling-credit-card-debt-6000.php

marty998

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Re: How to help an employee with massive debt
« Reply #4 on: July 03, 2018, 02:42:00 AM »
She has massive credit card debt. Long story short it needs to be consolidated as the $10,000 in annual interest on her credit cards are basically a prison at this point.

Assuming a rate of 20% this is about $50,000 in gross debt! Holy crap.

But that's not insurmountable... people pay more in interest on their mortgages or student loans each year and no one bats an eyelid.

She can pay it off like any other debt if she is committed to doing so.

alsoknownasDean

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Re: How to help an employee with massive debt
« Reply #5 on: July 03, 2018, 03:03:08 AM »
I guess there's really three main options.

1) Cut expenses to the bone and try and put out that hair-fire. Sell anything of value (even her home if she owns) to settle the debt. Perhaps nudge her toward Dave Ramsey?

2) Calling all financial institutions and trying to renegotiate rates, or consolidating debts into a single large debt with a lower interest rate.

3) Declaring bankruptcy. What's bankruptcy law like in Canada, and would it affect her employment?

Just wondering, is she in control of any money as part of her job (authorising payments, processing payroll/accounts, etc?)? If someone's in control of money at work and is in significant personal financial stress, there's a higher risk of employee fraud.

Linda_Norway

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Re: How to help an employee with massive debt
« Reply #6 on: July 03, 2018, 03:20:55 AM »
You can help her by handing her a pair of scissors to cut her credit cards in your presence. I presume she now has a really low credit score and cannot easily get a new card? Otherwise, help her to somehow block her credit.

You can also help her by agreeing on paying some of her salary directly to the creditors, after she has negotiated which ones and how much. So that she cannot spend it before paying off her debt. But this should be unnecessary if she is serious about the matter.

And I found this link:

https://www.canada.ca/en/financial-consumer-agency/services/debt/debt-help.html

UKMustache

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Re: How to help an employee with massive debt
« Reply #7 on: July 03, 2018, 05:24:13 AM »
Give her a pay cut and pile three employees worth of work onto her, she's not going anywhere.




*This is clearly intended to be tongue in cheek before anyone jumps down my throat*

YttriumNitrate

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Re: How to help an employee with massive debt
« Reply #8 on: July 03, 2018, 05:32:00 AM »
I have a long-time employee who has been with me for years. We had a discussion that concerned me. She brought up her financial situation. She has massive credit card debt. Long story short it needs to be consolidated as the $10,000 in annual interest on her credit cards are basically a prison at this point.

Did she actually ask for advice, or was she just telling you her situation? If the later, giving unsolicited financial advice often backfires.

MishMash

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Re: How to help an employee with massive debt
« Reply #9 on: July 03, 2018, 06:52:54 AM »
I have a long-time employee who has been with me for years. We had a discussion that concerned me. She brought up her financial situation. She has massive credit card debt. Long story short it needs to be consolidated as the $10,000 in annual interest on her credit cards are basically a prison at this point.

Did she actually ask for advice, or was she just telling you her situation? If the later, giving unsolicited financial advice often backfires.

Yup, this.  I came out of school with 100k in student loans (no regrets).  Mentioned it in passing to my first boss.  The next day she gave me a copy of the book and told me to ignore the religious backing (knowing I'm not religious) and to focus on the lesson.  She told me she'd been using the methods for a number of years to pay off their stuff.  Best. Advice. I. Ever. Got. 

Like no shit, that's what started me on the path of -100k to a seven figure net worth inside of 12ish years.  If it hadn't have been for that boss showing me this different psychology about money who knows where I might have ended up.  I was always a saver but that much debt felt like a prison. 

Now I can't stand listening to Dave Ramsey.  His commercialization of everything annoys the crap out of me, but the community aspect of others that were in debt on the Facebook page and could provide a "you can do it" really helped at the time.
This

If she did do ask, point her towards Dave Ramsey.

the_fixer

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Re: How to help an employee with massive debt
« Reply #10 on: July 03, 2018, 10:22:11 AM »
I like the Dave Ramsey idea.

You could send her to his financial peace university as a gift, I think it is pretty cheap ~ $100 USD

While not perfect mathematically it seems like a good program for people in that situation.

Sent from my Pixel 2 XL using Tapatalk


v8rx7guy

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Re: How to help an employee with massive debt
« Reply #11 on: July 03, 2018, 10:30:10 AM »
Another vote for Dave Ramsey FPU.

Hargrove

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Re: How to help an employee with massive debt
« Reply #12 on: July 03, 2018, 06:40:20 PM »
Yeah, if she didn't ask for help, the correct response is "that sounds difficult" /end/.

If she asked for help, "just call them - they don't want anybody to default, so they'll usually suspend an account and lower interest rather than risk you just stopping payment."  That could save over half the annual bill. Knew someone who did that and went from like 17% to 5.99% on a Discover card.

AnnaGrowsAMustache

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Re: How to help an employee with massive debt
« Reply #13 on: July 07, 2018, 03:00:57 PM »
I would honestly not bother. You can't help people; you can only help them help themselves, and it doesn't sound as though she's helping herself. If you get involved you'll just end up stressed and frustrated.

Why did she bring it up with you? Was she angling for a loan?

COEE

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Re: How to help an employee with massive debt
« Reply #14 on: July 07, 2018, 10:02:54 PM »
As a boss, I would tread very carefully here and have as little direct involvement as possible.

This. 

Her problem is not your problem or the companies.  She is a grown woman - she can presumably use google to find solutions and help.

At most I'd get her the FPU book and call it good.  Answer questions if she has any.  The end.  She's got to do the hard work.

You're a good boss to care, but this is where tough love comes into play.

LeRainDrop

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Re: How to help an employee with massive debt
« Reply #15 on: July 07, 2018, 11:41:30 PM »
You can help her by handing her a pair of scissors to cut her credit cards in your presence. I presume she now has a really low credit score and cannot easily get a new card? Otherwise, help her to somehow block her credit.

You can also help her by agreeing on paying some of her salary directly to the creditors, after she has negotiated which ones and how much. So that she cannot spend it before paying off her debt. But this should be unnecessary if she is serious about the matter.

And I found this link:

https://www.canada.ca/en/financial-consumer-agency/services/debt/debt-help.html

I would personally find all of the above to be crossing boundaries with an employee.
It's one thing to give informed advice as to what credit services are more reputable than others, but it's another to insert oneself into the actual process that an employee chooses for managing their debt.

As a boss, I would tread very carefully here and have as little direct involvement as possible.

I agree fully with Malkynn.  You have to keep boundaries around the employer/employee relationship.  You don't want her later blaming you if you gave advice that didn't work out for her.  You don't want her feeling pressured in your presence to take your advice about her finances or that you may be silently judging her (even if you're not actually doing that) because that can really mess up the work dynamics.

TartanTallulah

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Re: How to help an employee with massive debt
« Reply #16 on: July 08, 2018, 01:09:15 AM »
We have a senior employee who has disclosed that she's unable to make ends meet on her current (substantial) monthly paycheck; I haven't asked about debt, because her personal finances are none of my business, but she was "helped" by a previous employer and I wouldn't be surprised if she was maxed out. I'm afraid my compassionate and sensitive response has been to ensure she has no legitimate access to the business bank account or the payroll software and to make it clear that overtime claims will be policed.

Hargrove

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Re: How to help an employee with massive debt
« Reply #17 on: July 08, 2018, 01:34:41 AM »
Yeah, unfortunately, it's not really about giving them the twist or not, it's about conflict of interest and employer liability. It's just not a good position from which to get involved with that part of a person's life, and it's very easily misconstrued.

And, as TartanTallulah points out, risk to your company rises substantially from debt-maxed employees. The military considers bad credit/high debt a national security risk.

ETwagon

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Re: How to help an employee with massive debt
« Reply #18 on: July 08, 2018, 11:53:51 AM »
I would honestly not bother. You can't help people; you can only help them help themselves, and it doesn't sound as though she's helping herself. If you get involved you'll just end up stressed and frustrated.

I agree. Start watching for theft and have a back up plan if she needs to be fired.

AnnaGrowsAMustache

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Re: How to help an employee with massive debt
« Reply #19 on: July 08, 2018, 11:59:59 PM »
I would honestly not bother. You can't help people; you can only help them help themselves, and it doesn't sound as though she's helping herself. If you get involved you'll just end up stressed and frustrated.

I agree. Start watching for theft and have a back up plan if she needs to be fired.

Unfortunately, this is quite a high risk. It's not unheard of for people to convince themselves they've been wronged by an employer who wouldn't bail them out and therefore are entitled to take from that employer.

Livingthedream55

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Re: How to help an employee with massive debt
« Reply #20 on: July 09, 2018, 10:50:00 AM »
You may want to consider hiring an Employee Assistance Program for your business:

https://www.canada.ca/en/health-canada/services/environmental-workplace-health/occupational-health-safety/employee-assistance-services/employee-assistance-program.html


They reference this organization which covers North America:
https://www.easna.org/

Membership fees are based on the # of employees. They typically do debt counseling and assistance.