CFOs should be alert to employees seeking second incomes
Employees taking a second income can have a significant impact on CFOs and the wider finance function, including increased taxes, loss of benefits, and additional workload
Employees taking a second income can have a significant impact on CFOs and the wider finance function, including increased taxes, loss of benefits, and additional workload
A higher proportion of financial professionals are seeking a second source of income to mitigate the cost-of-living crisis in the UK, new research has found.
This can pose significant risks to the CFO, and the wider finance function.
A survey of 169 senior HR, finance, and C-suite professionals, conducted by risk management and insurance intermediary Partners&, revealed many workers are seeking additional income streams away from their primary employer
More than one in three employers (36%) are either aware or suspect that their employees are now undertaking a second job in response to the cost-of-living crisis.
Steve Herbert, wellbeing and benefits director at Partners&, says employees taking on a second or even third job exposes the primary employer to potentially greater people risk.
When employees take on a second income, it can have a significant impact on the CFO and the wider finance function within a business.
A second income can affect an employee’s taxes, benefits, and overall compensation package, which can have a ripple effect on the company’s budget and financial planning.
As a result, CFOs will need to consider increased taxes, loss of benefits, and additional workload, which can affect the company’s budget and financial planning.
Employees taking on a second income stream are also likely to be less productive as taking on additional jobs could result in a tired workforce; a workforce at risk of suffering from burnout and illness.
Herbert says that to mitigate this, employers can offer support to members of their team through financial wellbeing and education.
“These are economically tough times for the United Kingdom, and employers will be doing all they can to continue trading profitably while also supporting their workforce,” he says.
“There is a limit to how far you can go with pay raises during a global recession. But you can do things to help them manage their money better; it’s a light touch solution, but it will help a lot of people out of the problems they’re facing.”
Another significant risk for the CFO is the potential for fraud and embezzlement.
Employees who are experiencing financial hardship may be more likely to engage in fraudulent or embezzlement behaviour.
Herbert states there had been cases of employees and even senior executive using company equipment to earn an extra income.
“This is true. I remember somebody with a company car. He was actually working as a taxi cab drive in the evening and he was a senior executive,” says Herbert.
“[This meant there were risks] not only for him as an individual, but also for the car and insurances around the car, which could lead to increased claims and a rise in insurance costs.”
Not only does this affect the company’s bottom line, but it can also damage its reputation.
While a large share of businesses will have policies in place to prevent employees from taking on second income streams – especially those which pose direct competition to their primary employer – the current economic environment makes it challenging to deter employees from taking their financial security into their own hands.
As a result, to mitigate the risks of employees taking on a second income, CFOs and the finance team must be vigilant and have a clear understanding of the risks involved.
Having clear fraud and embezzlement prevention measures in place will be crucial, and training around recognising these types of behaviours could also be provided.
Additionally, CFOs and the finance team must be proactive in working with employees to understand their financial needs and provide them with the resources and support to manage their finances effectively.
CFOs should focus on creating a culture of transparency and open communication where employees feel comfortable discussing their financial situation and the finance team can proactively address any concerns.
It is important for CFOs to continuously monitor and adjust these strategies as needed to adapt to changing circumstances to protect the organization’s financial health.