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Debt advice charity StepChange puts 170 jobs at risk of redundancy

25 May 2021 News

Up to 170 staff face compulsory redundancy at debt advice charity StepChange, which says its finances have been significantly affected by the pandemic. 

Phil Andrew, chief executive of StepChange, said that the plans for cutting costs were “difficult and painful” but necessary to secure the charity’s long-term future.

However, Unite the Union criticised the charity’s management for proceeding with the plans before the furlough scheme closed.

The union said that one in 10 of the charity’s staff could lose their jobs, with redundancies falling most heavily on staff based in Leeds and Newcastle.

Charity boss: We must address ‘significant shortfall’

StepChange is based in Leeds, and is the largest provider of free debt advice in the country. 

Andrew wrote last month that the charity had been hit especially hard by Covid-19 because it relies on contributions from creditors for the majority of its income.

Under this system, called fair share, creditors who receive money back from people in debt make contributions to StepChange in recognition of the charity’s intervention.

StepChange had an income of around £55m in 2018-19, of which £44m came through fair share. The most recent accounts suggest that fair share income had already fallen by 15% by last August.

Andrew’s blog, which confirmed that between 140 and 170 jobs were at risk, said: “The combination of fewer people yet taking debt advice (because temporary support [during the pandemic] has not yet been withdrawn), and the lower payments being made by many existing clients toward their debts (due to higher creditor forbearance, and lower client incomes) mean that we face a significant shortfall between the funding we had anticipated getting at this point, and the amount that we are actually getting.”

Unite: Debt advisers are charity's strongest asset

Unite said that the charity is planning to proceed with redundancies before the furlough scheme ends, even though the country faces “a massive and imminent upsurge in demand for free debt advice”. 

The charity, which has invested heavily in digital technology as part of a five-year strategy, argued that this demand can be met through an online debt advice tool.

However, one adviser at StepChange said: “Many of our clients are not able to access online help and rely on a friendly and knowledgeable adviser at the end of the phone. Some of them are very vulnerable. 

“Our clients want a supportive, caring person to talk to, not a machine. Our advisers are our strongest asset.”

Alternative funding

Unite urged the charity to explore other options to address the current funding shortfall, including wider use of the furlough scheme, more options to take voluntary redundancy or job shares, and restructuring senior roles.

The union added: “Senior management have publicly admitted the charity’s funding model, which relies chiefly on fair share contributions from creditors, is unsustainable. 

“The charity should urgently explore alternative ways of funding its activities, to safeguard our vital service for the future.”

Engagement

Today Andrew told Civil Society News: “The regrettable proposals to make redundancies at StepChange is based on the volume of people currently coming to us for debt advice, which has been significantly suppressed now since the start of the pandemic. 

“In 2020 we helped 200,000 people through full debt advice, compared to more than 300,000 in 2019. This year is on track to see continuing reduced demand for debt advice. 

“The inescapable reality is that our funding structure depends upon advice volume, which is why we are sadly having to introduce cost cutting measures that include, but are not limited to, redundancies. 

“This is a difficult and painful decision. It is not what we would have wished to do, but we believe is the right thing to protect the long-term future of the charity. 

“We hope that this will help to concentrate the minds of policymakers and funders alike on what debt advice is for and how it can be sustainably funded. 

“It is important to state that these remain proposals at this time and are under consultation with colleagues. 

“We have a full internal engagement process with colleague representatives as well as individuals and will continue to offer as much support as we can to those potentially affected by these proposals.”

Labour MP Richard Burgon, who represents a constituency in east Leeds, said: “StepChange management should work constructively with Unite the Union to prevent redundancies, secure these jobs & protect the vital work StepChange does”.

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