Need to know:
- Employers should first assess the current level of financial awareness among their employees.
- A return on investment (ROI) for a financial education programme can be partially measured via hard data such as benefits take-up figures or increased log-ins to a pension portal.
- Integrating education with financial products and services available through a benefits offering can help to improve employees’ financial standing.
Financial stress can have a serious impact on the workplace: employees distracted by money worries hold the risk of being less productive and effective in their day-to-day roles.
Research by the Chartered Institute of Personnel and Development (CIPD) and Close Brothers, Financial wellbeing: the employee view report, published in January 2017, found that 25% of employees believe that financial concerns have affected their ability to do their job. The research found that this can affect employees through lost sleep (19%), finding it hard to concentrate or make decisions at work (10%), and time spent at work dealing with money worries (8%).
Investing in financial education can, therefore, be a proactive way of supporting employee wellbeing. But how can organisations ensure that their programme generates a return on investment (ROI) for the business?
Brian Henderson, UK defined contribution (DC) and savings leader at Mercer, says: “We quite often talk about the financial wellness of the employee, but we’re also talking about the financial wellness of an employer, [and] really focusing on the ROI number and improving it.”
Taking measurementsThe ability to track a financial education programme’s effectiveness can be challenging, but an employer first needs to establish where it is starting from. Understanding the current financial awareness of the workforce, by using short pulse surveys, for example, is a useful first step in implementing a financial education programme, says Francis Goss, chief commercial officer at AHC. “In order to demonstrate a real return on investment, [employers] have got to firstly understand where people are at now in their understanding of financial matters,” he explains. “The first thing is to understand the current level of financial literacy among employees.”
If employers subsequently conduct another pulse survey a year after the programme has launched, they will be able to track the impact of financial education on employee understanding.
Employers could also use the level of engagement among employees with their benefits as one indicator for ROI. This could be gauged by looking at, for example, how often an employee logs in to their pensions portal, open rates on pensions or benefits communications, take-up figures or changes to benefits choices.
Employers could also use data from other sources to assess the impact of a financial education programme, says Darren Laverty, partner at Secondsight. This can include absenteeism, staff turnover, recruitment costs and productivity data. “The first thing [employers] want to be looking at is absenteeism and the reasons for absenteeism,” says Laverty. “Sometimes that’s mental health because people are stressed. Those things [employers] can measure because [they] have the data.”
Personalise for engagementEnsuring staff engage with a financial education programme is vital to achieve a return on investment. One way to achieve this is through the use of personalised financial education. Nudge’s January 2017 report, The financial education yearbook 2016/17, found that 65% of employers believe that financial education should be tailored for each employee. The report showed that popular methods of personalisation are by age (83%), financial goals (78%) and benefits choices (54%).
Tim Perkins, co-founder and director at Nudge, says: “For [financial education] to have a positive return, it needs to be used by employees. The days of financial education being a box-ticking exercise are gone. [Employers] put something in place, [they] need to make sure that people are using it, so it needs to be delivering the content and the topic that employees want to learn about.”
A self-service approach to financial education can help to ensure messages are relevant. For example, employees could self-select how financially literate they believe they are when embarking a financial education programme, so that the targeted information they are provided with is appropriate for their knowledge base.
Equally, a general financial awareness presentation could be used prior to a focused seminar programme. The presentation could highlight seven or eight key financial topics, with employees then deciding which seminar sessions would be most relevant for them to attend based on this overview.
Goss says: “The most effective way to deliver financial education is, first of all, to understand the individual that is going through that education and tailor [this] to them.”
In order to measure the ROI, employers also need to consider the cost and time invested in a financial education programme. Although programmes can be delivered during working hours, some employers may wish to implement digital options so that staff can find information outside of work.
Alignment with a wider benefits strategyA further way of achieving a return on investment is to align financial education with an organisation’s overall benefits offering. Benefits such as debt consolidation, payroll loans, workplace saving options or financial planning can help to support financially stressed employees. Financial education can then raise awareness that these benefits can be used as tools that can help combat different financial issues.
Goss says: “[Employers] that provide both the financial education and then the tools […] will have a positive impact on employees’ stress levels, or their level of effectiveness in the job.”
Key communicationsEnsuring that financial education is communicated in clear and simple language is vital to driving engagement and thereby achieving a return on investment. The CIPD’s aforementioned research found that 11% of employees cite difficulty in interpreting the jargon of financial products and services as a barrier to managing their finances.
Engaging communication methods could include personalised videos that use the employee’s own name and talk about their savings options, says Mercer’s Henderson. Webcasts can also be effective because they contain that element of face-to-face communication via an easily accessible digital medium, adds Secondsight’s Laverty.
“Anything employers do to make the whole experience from an employee’s perspective more enjoyable and more engaging will demonstrate and deliver a ROI,” says Goss.
Animated pension statements are one way employers are achieving this, he adds.
Although financial education does not have a single or exact quantitative metric, there are many areas of an employee’s life where having greater financial understanding can have a positive influence. As Henderson says: “If [employers] get the workforce a little bit more engaged, a little bit more knowledgeable, making the right decisions, then [employers] can see a benefit.”
