What to do when take-home pay is below 40%
Question: Our employees are paid industry-average salaries and wages. Many do overtime work, treating overtime pay as if it were part of their basic salary, and we give them all sorts of benefits. And yet they come to us asking for loans to fund expenses that should have already been covered by what they earn. Some don’t even take home 40 percent of their gross pay. Is there a solution to this problem?—Employee relations manager
Answer: Why should employers even bother about their employees’ finances especially when they are well compensated? After all, the law states that “no employer shall limit or otherwise interfere with the freedom of any employee to dispose of his wages. He shall not in any manner force, compel or oblige his employees to purchase merchandise, commodities or other property from any other person, or otherwise make use of any store or services of such employer or any other person.” (Book III, Title I, Chapter IV, Article 112 of the Labor Code of the Philippines.)
Like it or not, the employer becomes the big brother to the employee. And in times of financial need, big brother is the person of first resort. If an employer can afford to pay salaries and wages to a lot of people, it could surely spare a few thousand pesos in the form of loan, with interest at that. To the employer, it is not an issue of having the funds but of whether the employee’s need for cash is just a want. If it is just a want, the employer will surely not like to perpetuate the habit of mismanaging personal finances, which oftentimes leads to low employee productivity.
The solution lies in reorienting the employee to the appropriate values underlying money management, providing practical tips, offering continuous support through coaching and connecting the employee with the suitable financial product providers. This is a tall order as no company will create a separate department just to perform the functions that are not directly related to its business. The good news is that there is no need to. The human resources department can simply avail itself of the services of financial planners that provide a comprehensive lineup of services.
Please note that there is no need to form new values. People have already formed their own by the time they become adults. It is just a matter of strengthening the proper values. As an example, Gordon and Norma Yeager of State Center, Iowa, USA, enjoyed 72 years of marriage. Neither wanted to die ahead of the other because they felt they had to be around for each other. From the looks of it, they focused on what mattered most in their life, that of their commitment to each other. Believe it or not, experienced financial planners will devote time and effort to help their clients focus on the more important things in life like family, friendship, loyalty to country and faith in the Maker.
In a recent EnRich Cash & Debt – Risk & Wealth personal finance training that we conducted, a participant asked whether he should take advantage of a sale in rubber shoes now versus waiting for the time when he would have built up the budget to buy the shoes but at regular price. This is an example of one of the many financial choices we have to make daily. Our answer is simple. If promises are meant to be broken, budgets are NOT. Buying the shoes now even at the sale price will necessitate the reallocation of limited resources. If the sale is too good to pass off, make sure that no loan is incurred in buying the shoes. The issue therefore becomes one of buying shoes now at the sale price and foregoing or perhaps postponing some other expense originally due at the same time.
Challenging as daily financial choices may be, the expert financial planner will help his client develop a ready formula for dealing with such choices so that they could be done away with in a quick fashion bereft of emotion. Dwelling on such choices poses the danger of embedding consumerism in the mind and making wants easily look like needs. The important thing is never lose sight of the primary goals in life.
In a recent news report, Gordon and Norma Yeager figured in a car accident and were in critical condition when taken to the hospital. Both were taken to the same room in the intensive care unit. As they held hands, Gordon died at 3:38 p.m. But the couple’s son was perplexed because Gordon’s heart monitor showed a pulse even though he had already stopped breathing. The nurse checked and found out that it was Norma’s heartbeat, going through Gordon’s hand that was causing Gordon’s heart monitor to still register a pulse. Norma died exactly one hour later. Up until the end, the couple displayed their focus on their primary goal in life; they shared hearts.
If you want to know more about our comprehensive personal finance programs, call 2161541 or visit www.personalfinance.ph.
Efren Ll. Cruz is a registered financial planner of RFP Philippines, personal finance coach, investment adviser and author. Questions about the article may be sent by SMS to 0917-505-0709 or e-mailed to [email protected].
