In the face of a funding shortfall, StepChange is looking to make 140-170 redundancies as its expectation of advising 400,000 clients this year is not going to materialise.
With its funding structure dependant upon advice volume and its income varying based upon market conditions, the debt advice charity is looking to reduce its staff by 10%.
In a blog post by Phil Andrew, chief executive of StepChange, he explained that the majority of its funding comes from the “fair share” contribution that many creditors make in recognition of StepChange’s service, which is based on the level of the debt repayments that are passed on.
With the combination of fewer people taking debt advice because temporary support has not yet been withdrawn, and the lower payments being made by many existing clients due to higher creditor forbearance and lower incomes, StepChange has a “significant shortfall” between the funding it had anticipated getting and the amount it is actually getting.
StepChange advised around 200,000 clients in 2020, compared to over 300,000 clients in 2019.
Andrew said: “This funding model has obvious flaws, on which I have reflected on previous occasions in these blogs. Those flaws have never been laid bare quite so starkly as under current conditions.”
StepChange have already made use of the furlough scheme to seek to match its capacity and costs to the temporary reduction in demand.
The debt advice charity is still anticipating the number of people seeking debt advice to rise, given the number of people in problem debt has risen from 1.7 to 2.4 million during the pandemic. Andrew explained that the fact that StepChange expects demand to increase in the future doesn’t change its current reality.
Consultation is currently under way, and the blog post said that affected colleagues will be supported as they seek new opportunities. Other measures including a pay freeze and continuing use of furlough are also under way.