HR reminded about growing staff debt – 70% of young people regularly borrow for everyday living expenses

Young people in Britain are facing mounting debts and unaffordable living expenses, new research from Neyber has found, yet employers believe employees are borrowing less this year.

The study, carried out among 10,000 UK employees, found that an alarming 70% of people under-34 need to regularly borrow either to pay their monthly bills or deal with day-to-day living expenses. However, 77% of employers, down from 97% last year, feel that employees are borrowing. In fact, the DNA of Financial Wellbeing – Our borrowing needs, shows that employees borrowing for everyday living expenses has increased from 48% to 50% (2017/2018 respectively).

More worrying is that young people are turning to more dangerous forms of lending just to get by. Thirty-three percent of 25-34 year olds are using credit cards for day-to-day borrowing – higher than any other age group. The survey showed that the younger you are, the more likely you are to use a payday lender. Eight percent of 18-24 year olds said they had used one, compared to four percent of 25-44 year olds and zero percent of those who were over 65.

The combination of regular borrowing and uncertain incomes has led to many young people feeling stressed. Sixteen percent of 18-24 year olds said that their finances were out of control, while 20% of 25-34 year olds said they were only just coping.

Employer impacts

For HR, the impact of money worries can be significant. The findings in the survey show that six in ten employees said their behaviour changes when they are under financial pressure. This increased to more than 7 in 10 for those aged under-34. They said that money worries change their internal mindset and attitudes, and their ability to maintain focus at work.

Forty-five percent said that money worries affect their job performance and 40% said they affect their relationships at work. Employers are aware of financial worries causing changes in their employees. Sixty-eight percent agreed that this affects individuals’ behaviour, 69% their performance and 67% relationships at work.

Heidi Allan, head of employee wellbeing at Neyber, said,

“The survey show shows a real disconnect from what employers are thinking and what’s reality, particularly for younger employees. One of the reasons for this regular borrowing may be that more young people have jobs with fluctuating income. Sixty-eight percent of 18-24 year olds said their income changes each month. Over a quarter (27%) said their income varies by more than 30%”.

Neyber’s study shows there is evidence that debts are spiralling. The average unsecured debt among 25-44 year olds has risen to £14,794.35 in 2018.

Those in the £20,000 – £29,999 earnings bracket – which includes those on an average salary – are spending an average of 37% of their income on debt repayments, including mortgage or rent, per month. Excluding mortgages and rent, the average amount of unsecured debt employees pay each month is £325.

Allan added:

“Financial worries can lead to sleeplessness, stress and even depression. Clearly our research demonstrates that young people in Britain are not coping and are having to borrow just to get by. More needs to be done to support people, whether that’s providing better financial education in schools, working with employers to offer their young staff financial education or even providing debt support and guidance. If we don’t act now, we will see young people in Britain spiralling into debt they’re unable to repay. However, when we asked employees if they would welcome support and information to help them improve their financial, situation, over half (55%) said that they would.”

Phil Andrew, CEO of StepChange, said:

“There are nine million people who have to use credit to pay for essential expenditure. This includes over one million people using high cost credit to make ends meet. When borrowing becomes a safety net for meeting basic needs the outcomes are often bad. Not financial wellbeing, but the corrosive hardship and harm of problem debt.

“Employers have a strong interest in improving the financial wellbeing of their employees and can be well placed to sell the benefits of seeking advice before problems get out of control. This timely report from Neyber gives a call to action to ensure working life is a source of support rather than worry for young people struggling with their finances.”

Neyber’s full report can be found here.