Do employers have a duty to support their employees’ financial wellness?

By David Dodd, Consulting Director

Our latest Employee Benefits Watch research uncovered that UK employers are struggling to keep up with employee demand for financial wellness support. This is particularly poignant in light of the Organisation for Economic Co-operation and Development (OECD) issuing a warning over increasing household debt in the UK only last week[1], and against a backdrop of stagnant wage growth and escalating inflation.

What do employees want?
Employees are looking to their employers for support in achieving their financial goals. Our research found that over 40% of employees would appreciate greater employer support towards saving for a holiday and buying a house, yet just 12% and 4% respectively feel that they are supported by their organisations to reach these goals. It’s then not surprising to see that only 10% of UK employers currently have a financial wellness strategy in place. While almost all employers offer pensions plans and life assurance, very few offer the kind of support that can improve employees’ current financial situations. These traditional, long-term benefits can have little meaning for employees, who are encountering financial challenges day-to-day. Employers need to revaluate how they’re approaching financial wellness and consider whether what they’re offering is really appropriate.

Why is there a disconnect?
For employers, there are a number of factors that hold them back from providing more support. These include a lack of understanding, as our research found that 64% of employers are unsure about how much financial support, beyond mandatory salary and pensions, they should provide. 42% of employers expressed concern over the risk of getting too involved in employees’ affairs, and 25% were worried about the cost of scheme implementation. But, employers’ reticence to implement a financial wellness strategy is a real missed opportunity to engage with their people, as employees of all ages are crying out for more financial support. There’s a myth to dispel that these initiatives are too costly or would mean employers get too involved in employees’ personal finances – it’s may simply be a case of employers enabling easy access to self-service tools through technology.

What can employers do?
Financial concerns have a significant impact on engagement and productivity – so it’s imperative for organisations to take action and address this disconnect to make sure they are getting the best from their employees. Technology enables employers to empower and educate their employees – without actually getting involved in their financial affairs. Offering benefits in the form of saving, budgeting and financial education tools presents employers with an invaluable opportunity to not only connect with their employees, but to provide the financial support they are really looking for.

The market is also making it easier for employers to offer financial support, with an increasing range of fintech providers offering more sophisticated packages – from saving schemes to monthly budgeting tools. However, few employers are taking full advantage of these. Less than a third of UK organisations offer debt counselling, and less than a fifth offer debt management or consolidation services.

In summary
The good news is that the tide is turning. While just 34% of UK employers currently provide financial wellness schemes, 51% have plans to do so. Last month’s Budget, saw policy makers acknowledge that many UK households are experiencing financial hardship, with measures to ease the strain such as the abolition of stamp duty on properties up to £300,000, proposed. Employers need to follow their lead, and recognise that in today’s climate employees have a need for much wider-ranging financial support, easily delivered and managed through technology. By connecting employees to tools that will help them manage their own finances, organizations have an easy and scalable way to take advantage of the difference a well-delivered financial wellness strategy can make.