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Sun July 14, 2013
Planet Money

When Employees Need More Than An Advance On Their Paycheck

Originally published on Mon July 15, 2013 9:38 am

Andrew Rosenkranz says at least two or three times a week, he finds himself sitting across from an employee at his market research firm near Seattle, listening to some complicated personal problem.

Just last week, an employee described how her daughter and baby granddaughter were assaulted by a boyfriend. The daughter wanted to come back to Washington state but didn't have money for a plane ticket. And so, Rosenkranz says, the employee "was coming to ask, 'Hey, is there anything you can do to help us here?' "

A lot of conversations like that one have made Rosenkranz think his employees need more than just an advance on the next paycheck. Over and over, he says, he's seen the people who work at his company make financial choices that were likely to have bad consequences.

His employees borrow at punishing interest rates. They fail to enroll in the company's 401(k) despite the fact that the firm matches employee contributions. This actually saves Rosenkranz money; he doesn't have to make matching contributions when employees don't contribute. But, he says, he wishes more of his employees would take his money and sign up for retirement plans, because it's such a sensible move.

So Rosenkranz recently started offering his staff some time with a financial adviser. These days, this isn't so rare; a quarter of companies now offer one-on-one financial counseling, according to a survey by the Society for Human Resource Management. And more than half offer one-on-one investment advice, up from 38 percent four years ago.

Rosenkranz contracted with a credit union called Neighborhood Trust, a group that has also provided financial counseling to staff at a burger chain, stylists at a hair salon and employees of a home care cooperative in the Bronx.

Jose Robles, the maintenance supervisor at the home care cooperative, has been struggling with debt for years, taking out loan after loan. A judge recently allowed one of his creditors to deduct $71 from Robles' paycheck.

Robles recently met with a financial adviser from Neighborhood Trust, who helped him make a spreadsheet to show what he was earning and what he was spending. Robles thought he was working his way out of debt. But when he added up all the numbers in the spreadsheet, he realized he was wrong: He was actually going deeper and deeper into debt.

"You look at those numbers and you wonder, Whoa, wait a minute, I'm spending more than I'm actually bringing in," he says. "I thought I had it under control, and I didn't."

Now Robles is trying to cut back everywhere he can, from bowling less with his kids to eating out less often. He's hoping to save a chunk of money big enough to negotiate a lump sum deal with the debt collector.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

DAVID GREENE, HOST:

If you work in the United States, you generally get paid. And that's a good thing. But along with giving you a paycheck, more and more employers are offering advice on what to do with it. Marianne McCune from our Planet Money team looks at financial counseling at work.

MARIANNE MCCUNE, BYLINE: It turns out being a boss is sometimes like being a social worker. Andrew Rosenkranz says at least two or three times a week, he finds himself sitting across from an employee at his market research firm near Seattle, listening to one or another very difficult-to-solve problem. Just last week, an employee described how her daughter and baby granddaughter were assaulted by a boyfriend.

ANDREW ROSENKRANZ: And the police were looking for him and she wanted to come back to Washington state but didn't have the money for a plane ticket. And so she was coming to ask, hey, is there anything you can do to help us here?

MCCUNE: Conversations like that one - a lot of them - have made Rosenkranz think his employees need more than just an advance on the next paycheck. Over and over again, he says he's seen them make financial choices that will plague them down the line. They borrow at punishing interest rates; most do not enroll in the company's 401K, even though the firm matches their contributions.

ROSENKRANZ: I mean, obviously, the less people participate the less we pay. But, on the other hand, you know, there's a silliness. It's essentially free money for employees.

MCCUNE: And he wishes more of them would take the company's money. So Rosenkranz recently became one of a growing group of employers to offer his staff some time with a financial advisor. A Society for Human Resource Management survey shows a quarter of companies now provide one-on-one financial counseling, and more than half offer one-on-one investment advice - up from about a third four years ago.

JOSE MIRANDA: So the same way you have health insurance, or you have life insurance through your employer, you also have access to a financial advisor.

MCCUNE: That's Jose Miranda, an on-the-job financial counselor. He works for a credit union called Neighborhood Trust that contracts with employers. Miranda has been working with Rosenkranz's employees, staff at a burger chain, stylists at a hair salon, and with this guy.

JOSE ROBLES: My name is Jose Robles.

MCCUNE: Robles is the 36-year old maintenance supervisor at a home care cooperative in the Bronx. And he says in his 20s...

ROBLES: I thought, well, if I borrow from Peter and pay Paul, it was going to work out.

MCCUNE: He financed cars without reading the small print. He used credit cards to pay off loans. When he sat down with Miranda for his first session, he had to tell him about the collectors who've been after him every since. One of whom just won the right in court to deduct $71 from his paycheck every week.

MIRANDA: He commented to me that he was really stressed out. He felt like his entire paycheck was going to his bills and paying his debt, and he couldn't really live how he wanted to.

MCCUNE: It wasn't until Miranda helped Robles make a spreadsheet - showing what he was earning versus what he was spending - that Robles realized he wasn't slowly climbing his way out of debt, as he thought. He was slowly digging himself deeper.

ROBLES: You look at those numbers and you wonder, whoa, wait a minute. You know, I'm spending more than what I'm actually bringing in. I was embarrassed.

(LAUGHTER)

ROBLES: I was embarrassed for him to see that. I thought I had it under control and I didn't.

MCCUNE: They looked at everywhere he could cut back, from bowling with his kids to meals out. Miranda is trying to help him save a big enough chunk of money so he can negotiate a lump sum deal with the debt collector, and stop borrowing from his 401k.

Studies show this kind of financial education - if it's done the right way - really can help people save more and borrow less. And that's great for the employees. But why would employers want to pay for it? Well, a lot of them don't.

JOHN ROGERS: I mean, maybe it's occurred to them. But, it's like, maybe it's not their problem.

MCCUNE: John Rogers chaired President Obama's Council on Financial Capability. As he and other advocates of financial education spoke to businesses around the country, they found a lot of reasons employers do want to guide their employees. For example: Guilt. As companies replaced traditional pensions with retirement accounts - that people can't or don't know how to take advantage of - they feel a nagging sense of responsibility. Another commonly cited reason: Sometimes people living on the edge are not ideal employees.

ROGERS: You know, People miss days of work. They just can't be as effective, they can't be as productive when they're under enormous stress.

MCCUNE: So helping them budget better is good for the business. But though Rogers wishes there were, there is no definitive research to date to show financial education at the workplace does help with the bottom-line. It's still a grand experiment.

Marianne McCune, NPR News, New York.

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GREENE: It's MORNING EDITION from NPR News. Transcript provided by NPR, Copyright NPR.

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