Financial wellbeing is all about feeling secure and in control of money, whether that is understanding the basics of budgeting; building a savings pot to provide a safety net; or knowing how to pick the optimum investment portfolio for a pension.
Although everyone’s relationship with money is a very personal thing, there are some compelling reasons why financial wellbeing should be on employers’ radars.
Why financial wellbeing matters
Seventy per cent of Brits, equivalent to roughly 40 million people, have experienced financial stress according to research published by comparison site Finder in October 2023.
And these money worries can affect employees’ physical and mental health.
A common side-effect is sleep disruption, leading to tiredness, strained relationships, and mental health issues. For example, Salary Finance’s report The employer’s guide to financial wellbeing 2020-21 found that individuals with poor financial wellbeing are 5.3 times more likely to feel depressed and 3.7 times more likely to suffer from anxiety and panic attacks.
This can affect productivity. Nearly a third (29%) of the UK workforce say financial worries have negatively affected their productivity at work according to a survey by Unum published in November 2022. This results in the loss of 17.5 million working hours a year, according to payroll solutions provider Zellis, at a cost of £120 billion to the UK economy.
Building a financial wellbeing strategy
Money worries can take many forms so a broad financial wellbeing strategy is essential. According to the Chartered Institute of Personnel and Development’s (CIPD) Employee Financial Wellbeing: A Practical Guide, published in February 2023, there should be three core elements: payments of at least a fair and liveable wage; support for in-work progression; and financial wellbeing education and support.
It also advocates putting an employee financial wellbeing policy in place. Its Reward management survey, published in April 2022, found that although only 18% of organisations had one in place, where there was a policy, employees were seven times more likely to say their employer has a positive influence on their financial wellbeing.
As well as highlighting the organisation’s intention to support financial wellbeing, this policy could also set out ways it helps employees manage their money. Examples include: offering flexible and hybrid working, so employees can reduce the cost of commuting; paying expenses promptly; and setting up a hardship fund.
Avoiding the potential pitfalls
Any financial wellbeing strategy should avoid making assumptions. While employees on lower incomes may have more of a challenge making ends meet, it is not a given that financial worries are inversely proportional to earnings.
Asking employees which areas of their finances they would like more information on can help, especially where surveys are conducted anonymously. An employer may also be able to gain this insight from management information from existing benefits, for example, an increase in calls to the employee assistance programme (EAP) asking for help with debt, or a low take-up of increased pension contributions.
Financial wellbeing benefits
A variety of products and services are available to help employees feel more confident about their money. Financial education, guidance and advice are all available across a range of different formats including apps, online information and tools, workshops, seminars and one-to-one sessions.
As well as financial literacy tools, an organisation’s approach with its broader benefits package can also help to improve financial wellbeing. A pension can help an employee save for retirement; a health cash plan can pick up the tab for the six-monthly check-up at the dentist; and an EAP can provide support and guidance on everything from getting out of debt to sorting out a relative’s estate.
More recent additions, from providers such as Salary Finance and Wagestream, allow employees to access salary advances and loans. As there is a risk these facilities could lead to bigger money problems, these platforms include budgeting tools and financial education to improve employees’ money management skills.
Cost of financial wellbeing
Putting financial wellbeing on the workplace agenda can cost as much or as little as an organisation wants. Delivering face-to-face personalised financial advice comes at a cost but, if budgets are tight, an organisation could tap into the tools and information available from existing benefits providers.
Free events are also available. Talk Money Week and Pension Awareness Week are opportunities to get rid of the taboos around discussing financial matters.
Some organisations are taking this a step further and building their own networks of financial wellbeing champions or financial first aiders. These are employees trained to listen to any colleague’s financial issues and signpost them to relevant support and information.
Where to next?
Financial wellbeing support can come from many sources, including existing benefits providers and consultants. There are also organisations that specialise in this area, including Bippit, Money First Aid, Nudge Global and Wealth at Work.
More information about workplace financial wellbeing can also be accessed through the government’s Money and Pensions Service.
