What Are an Employee's Options During a Financial Emergency?

Life is full of surprises, and some of them can come with a hefty price tag. Whether it’s a broken boiler, unexpected car trouble, or urgent home repairs, knowing and understanding what financial options are available to your employees is important.

Here's a breakdown of the financial solutions available, along with some pros and cons to keep in mind.

Available Financial Options

1. Credit and Debt

If they need funds quickly, credit and debt options are readily available but come with important considerations.

• Employee Loans – Some employers offer employee loans with more favourable interest rates than payday loans.

• Payday Loans – Payday loans can offer fast cash but often come with very high interest rates.

• Overdrafts – An overdraft with a bank can be a short-term solution but be cautious of fees if you exceed your limit.

• Credit Cards – Credit cards can be useful for emergencies, but interest rates vary and can lead to long-term debt if not repaid on time.

While these options can provide speedy access to funds, they tend to come with notable drawbacks, including high-interest rates and strict repayment terms. Keep in mind that availability often depends on individual credit history and existing financial commitments. It is important for employees to review terms carefully before committing to any form of debt to avoid further financial strain, or even a debt spiral. 

2. Manual Advances

Some employers will provide employees with a manual advance of their wages if requested. While this can help smooth cashflow problems without the employee turning to debt, for every person that comes forward to ask a manager for a manual advance, there will be a few others who are either too private or proud to do so. These employees will often turn to debt options anyway, paying high interest and risking a debt spiral.

3. Earned Wage Access (EWA)

Earned Wage Access services, like Level, allow your employees to access part of their earned salary before payday. With Earned Wage Access, they can take care of emergencies without relying on costly credit options.

Benefits of Earned Wage Access:

• No interest or credit checks, since it's their own money.

• Instant access to funds when they need them most, without falling into a debt spiral.

• A safer alternative for those with limited credit options.

• Privacy and confidentiality, no need to ask a manager for an advance.

Seeking Support

It’s important for HR teams to maintain a two-way communication channel with their employees as supporting their financial wellbeing is becoming ever increasingly important. Earned Wage Access can help with this, offering financial flexibility to all employees with the same terms.

Unexpected costs will happen – but understanding what your employee’s options  are ensures you can provide appropriate support for their financial wellbeing.