How to Get Rid of Debt on Low Income? Top Strategies You Can Adopt for your Employees

For employees living on low incomes, managing debt can feel like an uphill battle. With rising living costs and stagnant wages, many workers struggle to keep up with their financial obligations. Debt leads to stress, decreased productivity, and even higher turnover rates as employees seek better-paying jobs to relieve their financial burdens. 

As employers, it's crucial to recognize the challenges low-income employees face and offer solutions that help them achieve financial stability. By implementing strategies that promote financial wellness, you can support your staff’s journey to getting rid of debt while improving overall morale and retention.

What is Financial Freedom in the Workplace?

Financial freedom in the workplace refers to the ability of employees to manage their financial obligations without stress or reliance on high-interest loans. When employees are financially secure, they are less distracted by money worries, more productive, and better able to focus on their job. 

Employers can play a pivotal role in helping their employees achieve financial freedom by offering benefits, education, and tools that empower them to manage their finances effectively and pay off debt.

Common Challenges to Create Financial Freedom for Employees

Creating financial freedom for employees, particularly those with low incomes, can be a daunting task for both employers and employees. Several barriers prevent employees from effectively managing their debt and achieving financial stability.

1. High Cost of Living

In 2024, Malaysia is facing a challenging economic environment with moderate inflation and ongoing concerns about the cost of living. Inflation has cooled, with the rate dropping from 4.2% in 2022 to below 2% by early 2024, but core inflation remains somewhat elevated at around 1.9%. Despite this moderation, many Malaysians feel financial strain, with nearly 50% of the population reporting that they are just "getting by" financially​.

As costs of essential goods, such as housing, food, and transportation, rise, employees find it harder to save money or allocate extra funds to repay debt. This creates a cycle where debt grows faster than the ability to reduce it. 

2. Limited Access to Financial Resources

Many employees are unaware of financial assistance programs or may not have access to affordable financial services like low-interest loans. Without these resources, employees may resort to payday loans or other high-interest options, worsening their debt situation.

3. Lack of Financial Literacy

Financial literacy is crucial for managing debt effectively. However, many low-income workers have never received formal education on budgeting, saving, or debt management, making it difficult to navigate their financial challenges.

4. Emotional and Psychological Stress

Debt causes significant stress, which affects not only the employee's mental well-being but also their work performance. Employees who are under constant financial pressure may struggle with concentration, engagement, and job satisfaction, further impacting their ability to manage their finances.

Recent data shows that financial stress has a significant impact on employees' mental well-being and job performance in Malaysia. A report by the Credit Counselling and Management Agency (AKPK) found that 26% of Malaysian workers experience financial stress, and 65% of those affected report reduced job performance as a result.

Financial stress not only distracts employees but also affects their focus and engagement at work. This ongoing stress can lead to burnout and decreased job satisfaction, ultimately hindering employees' ability to manage their financial responsibilities​.

Top Ways to Get Rid of Debt for Low-Income Staff

To help employees on low incomes get rid of their debt, you can offer practical support and programs aimed at improving their financial well-being. Below are some of the most effective strategies businesses can implement.

1. Employee Discount Schemes

Employee discount schemes allow your staff to access essential goods and services at reduced prices. These programs can help low-income employees save money on everyday expenses, freeing up more income to pay down debt. Discounts on transportation, groceries, healthcare, and other necessities can make a significant difference in employees' financial management.

2. Employee Assistance Programs (EAP)

Employee Assistance Programs (EAPs) offer confidential support services to employees dealing with personal and financial challenges. Through EAPs, employees can receive counselling on managing debt, financial planning, and even legal advice to negotiate debt settlements. By providing access to these resources, you can help reduce financial stress and guide employees toward better debt management.

3. Help Employees Make the Most of Their Savings

You can also encourage your employees to save by offering automatic savings plans or matching contributions to savings accounts. Even for low-income earners, small, regular savings can add up over time and help employees create an emergency fund that reduces their reliance on credit cards or loans. Additionally, your company can educate your team-member on the benefits of using tax-advantaged savings accounts, such as retirement plans, which can offer long-term financial security.

4. Financial Education Programs

Financial education programs are one of the most effective ways to help employees on low incomes manage their debt. These programs teach employees how to budget, reduce expenses, and prioritise debt repayment. By understanding concepts such as compound interest, credit scores, and the importance of savings, employees can make more informed financial decisions and gradually reduce their debt.

5. Debt Support with Earned Wage Access (EWA) Program

Earned Wage Access (EWA) programs allow employees to access a portion of their earned wages before payday. For low-income employees living paycheck-to-paycheck, this can be a game-changer. 

EWA helps employees avoid high-interest payday loans or credit card debt to cover emergencies or essential expenses. By having timely access to their wages, employees can stay on top of their bills and make more progress on debt repayment without accumulating more interest.

In conclusion, helping your employees get rid of debt, particularly those on low incomes, is not just about offering competitive wages—it's about providing the right tools and resources to foster financial stability. 

You can implement strategies such as employee discount schemes, financial education, and innovative solutions like Earned Wage Access (EWA) programs to make a tangible difference in their staff's financial well-being. By doing so, your business not only supports employees' journey toward debt freedom but also benefits from a more engaged and productive workforce.

Support your Employee's Financial Freedom with Paywatch

One of the most effective ways to improve financial wellness and support employees in achieving financial freedom is by offering Earned Wage Access (EWA) software like Paywatch. As the leading Earned Wage Access service provider, Paywatch offers a cutting-edge Earned Wage Access (EWA) solution that can help your employees manage their debt and reduce financial stress. 

By allowing your employees to access their wages in real-time, Paywatch empowers them to stay on top of bills and avoid high interest loans. Incorporating EWA into your employee benefits package can foster financial freedom, leading to higher retention rates, better morale, and a healthier work environment. 

Contact us and take the first step towards supporting your employees' financial well-being with Paywatch today!