Financial wellness programs and lending solutions that not only educate employees about financial readiness, but also offer emergency loans or product purchases paid back through payroll deductions, “just make sense,” according to one benefit industry insider. The real challenge for benefit brokers and advisers selling this voluntary benefit is overcoming employers’ pre-conceived notion of the products.

While some public sector employers and universities have long been known to offer employee emergency loan programs, the concept is relatively new as a voluntary employee benefit offered by private sector employers. But, it’s a benefit badly needed, some say, as employees increasingly living paycheck to paycheck continue to take out loans for emergencies or major purchases against their 401(k) plans  — a detriment to their future retirement security — or from less reliable sources.

“There are a ton of avenues for employees to buy products that they really need or want, but they’re not very responsible. These venues continue to get people in debt and keep them on this hamster wheel that has them taking out one loan to pay off another loan and so on,” says Josh Verne, CEO and founder of workpays.me, a financial wellness company that offers educational tools and an e-commerce website for employees to purchase consumer products using loans paid back interest free through payroll deductions.

Ironically, the irresponsible loan avenues that create a need for these voluntary benefits have also created a skepticism amongst employers that serves as the biggest hurdle employee benefit advisers selling the products encounter.

“On every corner there’s some sort of payday loan establishment or some place that says ‘bring us your car title and we’ll loan you money.’ So people immediately have a knee-jerk reaction” to any employee loan program, says Danny Kline, president of the Virginia Beach, Va.-based Payday Payroll services, which administers payroll deductions for the financial wellness company FinFit.

“Once the program is actually explained to them — that their employees are getting access to money at a more than reasonable rate and beyond that they’re getting access to an online site with tools which can help them get their lives on budget — that negative connotation is overcome pretty quickly,” he adds.

Still, some employers are in denial, Kline continues. “We all want to think as employers that no matter what we’re paying our employees it’s enough. But it’s not about what you pay your employee; it’s about what they make in correlation with what they spend.”

What employers don’t realize, he says, is that their employees are out there going and getting money by other means anyways, be it at the corner quick-loan store or a pawn shop.

As a benefit adviser, you have to get the employer past this denial, and once they accept that, say “Let’s look at the options,” Kline adds.

Financial wellness solutions

David Kilby, president of FinFit, says he sees more employers recognizing that financial emergencies can cause employees enough burden or stress to impact their ability to be productive on the job, encouraging employers to seek out financial wellness solutions.

“It’s a zero-cost investment by the employer, outside of creating awareness and motivating employees to participate in the program,” he says.

FinFit has worked with more than 300 employers to implement financial wellness programs that include free online financial education tools and short-term loans for financial emergencies costing between $500 and $5,000, depending upon what state the employee lives in and their income.

With an emphasis on education, training and developing the individual employee, Kilby says the FinFit program is set up to require employees experiencing a financial emergency or challenge to complete a personal assessment before they can have access to any of the credit products.

“We motivate the people to partake in their development,” Kilby says.

Verne says the workpays.me financial wellness program also offers educational tools to assist employees with financial planning and responsibility at no cost to the employer or employee.

The consumer products for sale on the workpays.me e-commerce site include large-scale products such as computers, cell phones and furniture or appliances that many employees would need to borrow money to purchase.

“We remind employers that their employees are borrowing against their 401(k)s, which creates an administrative headache for the company but also removes the benefit of what the 401(k) was designed for,” Verne says. 

The Atlanta, Ga.-based specialty e-commerce retailer Purchasing Power also offers consumer products, vacations and online education services for purchase through payroll deduction loans. Employees are qualified based on their job, with no credit checks.

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