How to create a savings culture in the workplace

Need to know:

  • Offering money management tools, and even numeracy workshops, can help employees get out of debt and build up to saving.
  • Financial wellbeing strategies should address all employee needs, from everyday costs to long-term investments, as well as being part of a holistic approach to wellness.
  • Without a strong foundation of communication and openness with which to break down taboos, savings benefits may not have the desired effect.

The role of the employer in influencing staff wellbeing is growing, with businesses seeing the benefits of supporting employees physically, mentally and financially, thereby enabling them to concentrate on their work in a positive and productive way.

However, financial wellbeing presents a particular challenge, says Jack Curzon, head of scheme design at Thomsons Online Benefits: “Over the past five to 10 years, health has become easier to discuss. However, the financial space is still taboo.

“You can’t talk openly about what you earn, and you never get people talking about how much debt they have; but they need to be talking about it to somebody.”

Add to this the feeling that today’s society is one of immediate gratification, and the idea of creating a savings culture can seem an uphill struggle.

Managing problems

A number of organisations have taken to offering money management tools, often to preemptively counter the debt issues that can be faced by employees across all demographics and levels of seniority.

Mark Pemberthy, head of defined contribution (DC) and wealth at consultancy Buck, says: “More and more employers are looking to help staff with problem debt, not only by helping them manage their finances better, but also by preventing the issue in the first place by encouraging them to save more.

“Most businesses understand that preventative solutions are best when it comes to debt management.”

Some employers are going further than this, by drilling down into core issues and providing training to help staff to develop better numeracy skills, allowing them to budget more effectively.

Holistic approach

In an ideal world, employees would first address any debt they have, then use their residual cash to make savings, and finally look to long-term investments.

With vastly different approaches and products needed for each of these stages, as well as the presence of various other concerns and pressures on an employee’s purse, a holistic approach needs to be offered to deliver true financial wellness.

However, it appears that many employers are yet to take even the initial steps, let alone look to delivering an all-encompassing financial wellness strategy.

The March 2019 Employer research from industry body Group Risk Development (Grid), for example, found that 29% of employers say they simply pay good salaries and leave employees to manage their own finances. Meanwhile, 17% offer financial education and only 11% offer access to debt counselling.

Katharine Moxham, spokesperson for Grid, says: “Nothing works well in isolation. It’s about offering a well-rounded group of solutions where products and advice complement each other and give the kind of support people really need.”

The first step, though, is a simple one, says Lucy Mullins, co-founder and head of memberships at StepLadder, a platform that supports first-time buyers.

“The successful financial wellbeing strategies involve well-thought-out communication to staff of the advice and benefits available,” she explains. “The most simple and fundamental starting point being ‘it’s good to talk’.”

Honest conversations

Cultivating a strong savings culture begins with an honest review of employees’ personal finances, adds Mullins. These initial discussions can then inform the provision of support and ensure a positive impact, and can, in themselves, lead to the creation of a healthy and open atmosphere in the long term.

“Those that support staff to talk openly about personal financial stress with them and offer trusted financial advice see far greater take-up of the benefits available,” Mullins explains.

For organisations looking to cultivate a willingness to discuss finances among their employees, the next step might be to introduce peer mentoring, allowing staff to find personal, informal support and ease the stress of facing financial concerns alone.

Short and long term

Delivering financial wellbeing ultimately means offering employees a range of good value financial products, facilitating short- and long-term savings, to discounts which offer better value for money.

Providing a variety of initiatives, from allowing staff to save smaller amounts on their weekly shop, to creating a more substantial rainy-day fund, and building up to buying property or saving for later life, will help employees at all stages, and can be combined to create a holistic savings culture.

For example, share schemes, such as share incentive plans (Sips) and sharesave schemes, give employees the opportunity to save in a tax-efficient way. With Sips, employees can invest to hold shares in a tax and national insurance efficient manner.

With sharesave schemes, employees can save between £5 and £500 a month for a fixed three or five year period. At the end of this time, they can either use their fund to purchase shares at a pre-determined exercise price or receive their savings. At the end of the scheme, a tax-free bonus is added to their savings.

The incentives and tax benefits inherent in certain schemes can make building positive saving habits more appealing, manageable and realistic in the short term, while, ultimately, building towards longer-term financial goals.

However, there are some pitfalls to avoid, particularly when an appealing savings benefit may have adverse effects. For example, discount schemes might, in fact, encourage employees to spend more money where they might previously have refrained from a purchase altogether, says Curzon.

The trick to avoiding these negative ramifications, and ensure that a healthy, positive culture of saving is created, is to underpin every financial benefit with an environment where it is acceptable to discuss financial issues.

The bigger picture

Using benefits such as share schemes, discounts, financial education, debt counselling and money management tools as standalone offerings in their own right will only go so far. To be truly effective, these benefits must be part of a wider financial wellness strategy.

For example, in 2017, energy supplier Ovo Energy introduced an arrangement which gave every employee access to an amount equal to 4% of their annual salary as a flex fund. In addition to this, the organisation implemented a workplace individual savings account (Isa) to give employees the option of investing their flex fund, and provided staff with tools such as free mortgage advice sessions.

Each of these elements came together and supported one another in forming the foundation of a savings culture, in which staff were provided with both the means and the education to take control of their finances.

“There is no doubt that financial worries affect productivity and leave employees feeling stressed, so tackling this issue head on will benefit morale as well as the bottom line,” concludes Pemberthy.