When money emergencies strike, employees often feel forced to take out loans as a quick fix. With 70% of Americans considered financially unhealthy—struggling with low credit scores, debt, and little to no savings—many turn to high-interest payday loans, predatory lenders, or even their 401(k) to get by. These options worsen employees’ financial stress and ultimately impact the workplace through higher healthcare costs, reduced productivity, and increased turnover.
Employers are uniquely positioned to help by providing access to employee loans not available on the open market. However, it’s important to follow six key guidelines to ensure employee loans are safe, supportive, and beneficial to financial health.
1. Give employees access to affordable rates
Employers can support financially vulnerable frontline employees by providing access to paycheck-linked lending solutions. Best-of-breed lending solutions typically base borrowing decisions on factors beyond an employee’s credit score and will intelligently use available employment data to ensure that employee loans are relevant and affordable.
Automatically deducting each repayment from the employee’s paycheck is advantageous for both the lender and employee, reducing the likelihood of missed payments. Paycheck-linked loans can help employees manage various financial challenges, including falling behind on bills and facing unexpected expenses. These loans might also help employees struggling with debt an opportunity to save money on interest and pay their balances off sooner than they would otherwise.
2. Provide personalized support to help employees explore all options
Employers should only offer paycheck-linked loans through a financial health benefit that doesn’t profit from employees’ choices. This approach ensures employees aren’t encouraged to borrow when they may be able to access better financial options (and possibly, avoid borrowing at all).
For instance, Brightside Financial Assistants are able to connect about half of the employees who come to Brightside for help with a money emergency with free government or local resources. In addition, these programs often provide more comprehensive support than a loan and address the root causes of financial challenges.
Take, for example, “Scott,” an employee who came to Brightside asking for an employee loan to help cover past due rent. Once his Financial Assistant learned that “Scott” was legally blind and facing eviction, she was able to connect him with a $5,500 grant that covered his overdue rent and provided three additional months of rental assistance – at no cost to him.
3. Offer a confidential experience
Employees are more likely to use a financial health benefit when they know their experience will be confidential and met with empathy. Brightside Financial Assistants work hard to build trust with every user and understand their circumstances without judgment. This approach often reveals other challenges that are contributing to the employees’ need for a loan—such as domestic violence, caregiving responsibilities, or legal issues. In these cases, Financial Assistants also help connect employees with additional employer benefits and resources, such as an Employee Assistance Program (EAP) or legal aid.
4. Implement guardrails so loans don’t cause financial harm
Paycheck-linked loans typically offer structured repayment plans that align with pay periods, but employers must ensure there are additional guardrails to protect employees’ financial health. For example, Brightside’s paycheck-linked partner loans consider factors such as an employee’s length of employment, monthly income, expenses, and other obligations to determine a safe borrowing amount. Loan terms and repayment amounts are also tailored to each individual’s financial situation.
5. Integrate healthy financial habits into the loan process
Integrating savings with paycheck-linked loans helps employees build a financial safety net, laying a foundation for improved financial stability. Yet, many financially ill employees simply don’t feel they have money to save. To remove those barriers, Brightside Financial Assistants help employees find money, create spending and savings plans, and connect them with free tools that can help them save money on recurring expenses.
Employees are also eligible to open a free Brightside Savings Account and earn a competitive interest rate on their money. The account includes an autosave feature that allows employees to contribute as little as $1 from each paycheck, to make saving simple. Each month, 50 Brightside users who use autosaving are randomly selected to win $100.
6. Pair loans with timely, bite-sized education
Research shows that employees who take out loans without financial literacy support often experience higher default rates and greater financial stress. However, one-size-fits all financial education isn’t effective. That’s why Brightside Financial Assistants also offer personalized, bite-sized financial education at the right moment, tailored to each employee’s needs. This ensures employees receive relevant, actionable information that helps them manage their employee loans successfully and makes it easier to take continued steps toward improved financial health.
Supporting employees’ short and long-term financial needs is a win-win
Brightside Financial Care is the only model designed to support the unique needs of financially vulnerable employees, with real solutions that include, but are not limited to, paycheck-linked loans.
More than 80% of employees say they feel less financially stressed after engaging with Brightside, which helps them show up to work as their best selves. It’s part of the reason Fortune 500 employers including Amazon trust Brightside to help support their frontline employees.
To learn more about Brightside or to schedule a demo, click here.
