Ensuring employee financial wellbeing during difficult times

Introduction

‘Financial wellbeing’ is a broad term and tends to make the topic seem nebulous but, simply put, it is a person feeling secure and in control of their money.

After the turmoil caused by the COVID-19 pandemic, UK unemployment rates have steadily begun to fall. However, the cost-of-living crisis and predicted recession have the potential to increase the number of people suffering from in-work poverty; a reality already experienced by one in eight workers.[1] Certainly, much more of the population will struggle to cope.

Investing in the financial wellbeing of your workforce has been proven to benefit not only your employees but your organisation as well. Why not stand out in your sector and retain high-quality talent by incorporating this essential element into your employee benefits package?

What is financial wellbeing?

Financial wellbeing can be summarised as an individual’s ability to make the most of their money. This applies to both short-term commitments (such as bills and housing) as well as unexpected expenses (such as car servicing). Furthermore, they should have a plan for their future monetary needs; the most common being regular contributions into a pension fund.

Research by the Money and Pensions Service (MaPS) suggests that the following factors influence an individual’s financial wellbeing the most:[2]

• behaviour – managing money, seeking professional advice, planning for the future;
• mindset – spending impulse control, financial confidence, willingness to save;
• abilities – numeracy, understanding financial concepts, knowing where to find advice; and,
• connections – access to financial guidance from reputable sources.

An employee who has good financial health is confident in their ability to manage all of these considerations.

Consequences of poor financial wellbeing

According to a survey by the MaPS, 45% of British adults do not feel confident in managing their finances and almost nine million people are in serious debt.[3] One in four plan to borrow money to cover expenses during the Christmas period. Of these, 13% of participants anticipate that it will take them longer than a year to pay back loans that could be predatory in nature and severely damage their financial stability.[4]

In turn, this could have negative effects on their overall mental and physical health, their relationships with loved ones and colleagues, and their productivity in their job role. A report by the Chartered Institute of Personnel and Development (CIPD) found that over a quarter of workers already believe financial problems have impacted their work performance. Most frequently, this is through lost sleep, heightened health issues caused by anxiety and stress, and the resulting inability to concentrate or make decisions at work.[5] Poor mental health is estimated to cost employers £34.9bn per year and a further £120bn is lost from the UK economy due to lack of productivity.[6]

Despite this significant impact, the CIPD found that only 18% of organisations have an employee financial wellbeing policy in place. Their survey further found that workers who are covered by such a policy are seven times more likely to praise their employer for having a positive influence on their monetary stability.[7]

As an employer, you are in a key position to provide help. By having a financial wellbeing strategy in place, you can support your employees through tough economic times and are likely to see a positive effect on your entire organisation as well.

How good financial wellbeing can benefit employers

Employees are more likely to stay with an organisation that demonstrates care for their needs. Increasingly, it is becoming a factor that potential candidates look for in addition to a good salary and supplementary benefits. Over three-quarters of workers who are financially stressed would consider moving to a rival employer who cares more for their financial wellbeing.[8] As such, this can influence your organisation’s ability to acquire and retain staff greatly.

Moreover, 4.9 working days are lost each year as a result of financial stress, and absenteeism caused by monetary worries cost large employers an average of £323,390 per annum.[9] By incorporating targeted guidance that can help staff members with their financial problems, you can help improve their circumstances and, therefore, reduce absenteeism.

Similarly, even if employees are present at work, they may find themselves too overwhelmed by monetary stress to perform at their best. Access to resources that aim to educate them about the challenges they are facing can give them the understanding they require to separate financial worries from their productivity in their job role.

Not only is supporting your employees a good way to build loyalty, but it is also an investment that can increase your organisation’s health as a whole. If you take care of your staff, they will work more diligently if your organisation ever faces difficulties in the current cost-of-doing-business crisis or further in the future.

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