The fourth wave is again forcing many employees to take on debt.
Short-time work, lack of student jobs and mini-jobs: the fourth wave of coronavirus is once again causing financial difficulties for many employees, warns Berlin-based financial advisor Frank Wiedenhaupt. The good news is that the sooner a person in or over-indebted seeks help, the easier it is to get out of the financial crisis.
According to experts, the coronavirus-related wave of insolvencies is set to continue into 2022. Do you also notice in your advisory services that more people are at risk of over-indebtedness than before the pandemic?
Frank Wiedenhaupt: Paradoxically, a wave of insolvencies is nowhere in sight this year. On the contrary: the number of insolvencies opened has actually fallen by 21.94% in the first 10 months.
However, the renewed economic restrictions in the retail, art and catering sectors will certainly ensure that many self-employed people will give up; not for economic reasons, but because many are now running out of mental energy. We are currently experiencing the mental exhaustion of those seeking advice in practically every consultation. I therefore assume that we will experience a tsunami rather than a wave in 2022.
Who is being hit particularly hard now?
The brick-and-mortar retail sector is currently being hit to the core. Standing in line to have your vaccination status checked, shopping with a mask, your nose starting to run due to the temperature differences under the mask: all things that are already making the shopping experience unpleasant to some extent. As a result, more and more consumers are turning to online shopping.
The catering industry has also been hit, having to cope with a huge wave of cancellations for company and private Christmas parties. As a result, nobody needs to buy new clothes because they can't be seen at parties and therefore can't admire their new suit. These sales are then missing from the fashion trade. The event and tourism industry will once again have to cancel major events and concert tours will be postponed. Planning trips is a lottery game.
This means, for example, that employees are sent on short-time working and student assistants are not needed in the first place. It means a loss of income for all of them, and these are potential triggers for over-indebtedness.
What advice do you have for people now to avoid getting into debt?
Especially in uncertain times, you should keep your money together and avoid long-term contracts that you can't easily cancel if you run out of money. The old smartphone will still do.
Can you always help people in debt?
People can always be helped if they allow themselves to be helped. However, psychological problems, untreated addiction or a penchant for conspiracy theories sometimes prevent people from getting to grips with their debt situation and resolving it. There is a reason why some people eventually seek admission to an emergency shelter for the homeless.
What can employers do to help their employees?
Employers realize that an employee has financial problems at the latest when the salary garnishment arrives in the HR department. The type of creditor or the number of garnishment orders alone indicate the extent of the financial difficulties. The head of department will also notice this, for example, if the work results are no longer correct or if an employee shows changes in character. A clarifying discussion can help here, and the debtor should definitely seek professional help to deal with the debt situation. In this day and age, nobody has to be ashamed of this.
And why is it worthwhile for employers to offer income and budget advice?
"Happy wife, happy life", the saying that stands for every good marriage, also applies to the relationship between employee and employer. It is no longer so easy to find well-trained staff. The "care" and support of people in the company will become more important. Employees who are constantly thinking about the beginning of the next month and how they will be able to cope with the upcoming debits from their private account will not be able to do their work as they would without financial pressure. Debt is also an enormous psychological burden. Professional income and budget advice ensures that this financial pressure is reduced in the long term. Sustainability will certainly become even more important in the coming years.
What do HR managers need to know when employees are in financial difficulties?
The earlier a person who is in or over-indebted seeks help, the easier and better this help can lead the person out of a financial crisis. It is therefore important for employees in HR departments to contact employees whose salary has been restricted by a garnishment and transfer order as early as possible. In advisory practice, there are always cases where timely intervention and redirection could have prevented worse. The cessation of the energy supply, the loss of the private tenancy and even the initiation of private insolvency proceedings could have been avoided if help had been sought in good time.
Where do you see the challenges for employers in the coming year 2022?
As before during the pandemic, the challenge continues to be planning for 2022 without a basis for planning. Does the employer have to monitor a possible vaccination obligation? Under what conditions are employees even allowed to work in the office or in a branch? To what extent is this whole situation putting psychological strain on employees and managers?
Even in 2022, we will only be able to drive by sight and have to take into account the fact that what was valid yesterday will be obsolete tomorrow. Spontaneous crisis management will continue to be the challenge for everyone next year.
Frank Wiedenhaupt is a debt and insolvency consultant in Berlin and has been advising entrepreneurs for over 15 years. Starting with a Turkish greengrocer's store in Berlin-Neukölln, over time freelancers, doctors, architects, lawyers and real estate developers were added to the list, along with new, much larger debts. The biggest "lump" that Frank Wiedenhaupt advised had debts of 33 million euros.