Need to know:
- The Covid-19 pandemic has placed many employees in difficult financial situations.
- Employers must break the stigma of financial wellbeing to communicate with their employees.
- Financial education and tools can support employees who are struggling with finances during this time.
The Covid-19 (Coronavirus) pandemic has created an unprecedented amount of financial difficulty and uncertainty for many people worldwide. Lane Clark and Peacock’s (LCP) Employee financial wellbeing research, published in May 2020, found that three-fifths (60%) of employees admitted to having lost sleep due to worries about their wellbeing in the past year. More than half (54%) think Coronavirus will have a negative impact on their personal finances.
With financial difficulties heavily impacting employee wellbeing and engagement, employers have a role to play in offering support to those facing such issues.
Challenging times
Financial hardship has long been an issue that employees have faced, however, the pandemic has substantially increased the number of people experiencing problems. James Malia, director of sales at Wealth Wizards, says: “The number of people experiencing financial hardship is even broader than normal because many have lost their jobs or received a significant drop in income. Many people now are just simply thinking about making it from one day to the next in their current situation.”
The Office of National Statistics’ Furloughing of workers across UK businesses: 23 March 2020 to 5 April 2020 research found that 27% of the workforce had been furloughed across 6,150 businesses during this period, while 1% of the workforce has been made redundant.
In addition, many businesses have had to introduce pay cuts. The high number of people affected by financial changes has presented a challenge for employers to find the right means of support, as every employee may be experiencing different circumstances.
Tim Perkins, co-founder at Nudge, says: “The pandemic has meant decisions have been taken from employees. Staff have been furloughed or lost income. They have lost a lot due to health worries and restricted freedom. In the past months, we've been seeing a significant increase in financial stress, while productivity has decreased."
Employees that have not experienced any changes to their own financial situation may have also suffered as a result of close relatives being subject to reductions in pay or job losses. Barnett Waddingham’s Covid-19 study, published in June 2020, found that of the 61% of employees that have seen a member of their household receive a pay cut, 79% said that their mental wellbeing was affected because of this.
Employer support
Having to deal with running a business as close to normal as is possible during these unprecedented times means that employers may have limited options when it comes to offering financial wellbeing support. So, how can employers help any employees who are suffering from the financial strain of it all?
“Employers have the opportunity to guide employees through this crisis," says Perkins. "Support them with the right financial support and benefits every step along the way.
"Financial benefits are key to ensuring that employees get through uncertain times like this smoothly. Offering financial education benefits so staff can better understand where their money is going, and how to handle it better can be crucial during this time."
Working flexibly for the foreseeable future can also help to support employees with their financial wellbeing. Employers should look at how to further support employees through effective communication, says Heidi Allan, senior consultant at LCP.
“The best thing for organisations to do is to listen to employees," she explains. "They will be able to say what’s working and what isn’t working for them. Creating an effective feedback mechanism can be very well received.
“Communicating on a regular basis can give employers the opportunity to offer office equipment, or subsided new work tools to help them work from home. [Employers can save] employees from buying their own desks, stands, or save them money that they would use on electricity bills.
"Offering benefits can significantly aid employees going through financial uncertainty, hardship funds, or early access to pay can go a long way."
The Coronavirus pandemic has meant that many employees may experiencing levels of debt unlike any they have incurred before. Employers can offer debt education, informing employees about how they should manage debt, what options they have available to them, and who would be best to contact about their situation. Debt education must also inform employees of the risks involved with being in debt and what to expect from this situation. Employees may also benefit from understanding how to negotiate an agreement or debt repayment plan that best suits both parties.
With many businesses still working remotely, there are a number of options employers can utilise to reach staff. "Digital workshops and debt management webinars can engage employees in this level of education while [they] are working remotely," says Malia. "Businesses can offer the exact same level of content that they would offer employees in person. The perks of doing this through webinars and video classes mean that employees have it as a permanent resource, that they can save to their desktops whenever they need to access this information."
If employees do come up against financial difficulties, employers may be in a position to help through payments from a hardship fund, for example, says Allen. "Employees can benefit from being offered a hardship fund by their organisation, which can help them in their most times of need," she explains. "During the Coronavirus pandemic, many may be struggling with short-term debt or dealing with a lower income than usual."
Some employees may still perceive there to be a stigma attached to accessing such benefits and requesting access to use these funds, however, Coronavirus has reduced the transparency of both businesses and employees going through financial hardship, says Perkins. "The pandemic has meant that employees and employers alike have had to deal with unprecedented financial hardship over the past few months, which has increased transparent communication between the employee and employer," he explains. "It may have been difficult to discuss financial hardship in the workplace before, but now there is little option but to address it head on."
The pandemic may mean employees are initially reluctant to seek help with their financial situations. The first step is to break down this stigma, as many people facing financial difficulty may have not been in this situation before, says Paul Barrett, head of wellbeing at Bankers Workers Charity.
"It’s important for businesses to break down that stigma through their financial wellbeing programmes and help those in financial distress to see things differently." he explains. "StepChange's Lifehappens research, published in July 2019, shows that three in four of the clients [it] helped got into debt through life events, or an income shock such as redundancy, serious illness or a separation or divorce, things that could happen to anyone. And that needs to be better understood to stop people equating financial difficulties with recklessness or irresponsibility with money.”
Despite this, some employees may still find it difficult to speak up about their financial issues. This is where creating an open and transparent communication line with employees is crucial to ensure that employees are getting all of the help that they need.
"Pulse surveys and check-ins will not take up many resources, but can reassure employees that someone is listening to their difficulties," says Allen. "These check-ins are crucial for employees working from home, as it will help employers understand what needs to be provided during this time, and reduce the stigma around financial difficulties."
In the short term, employers can also offer early pay incentives. Through such schemes, employees are able to access a percentage of their monthly pay whenever they want, usually for a small fee. This can be effective to help employees who are facing short-term financial difficulties, however, without the right financial education support, it could mean that they may be in an even worse situation than before.
Early payment services, such as those provided by Wagestream or Hastee Pay, are good options for employers to use if they are looking to introduce new financial benefits throughout the pandemic, says Allen. "Early pay could be a good alternative to offering employees quick and easy access to their savings, but they need to understand that this will eventually balance out as the month goes on," he explains. "With the correct financial education, it can be a good perk to add to support employees who are in a difficult financial situation."
Long-term plans
Alongside such measures, however, it is important to offer a long-term plan for employees, giving them the option to restructure their finances.
“When lifestyles begin to return to the new normal, it’s very easy for them to adjust back to where they were," explains Malia. "Encouraging employees to set goals and plans to better manage finances to prepare for unprecedented situations can be beneficial. Introducing tools can help train employees to be better with their money.”
Alongside tools and financial education support, businesses could choose to offer loans to employees. These can aid staff long term in managing a shift in finances. Loans, such as those provided by organisations such as Salary Finance, can be a way of helping employees out of difficult predicaments. It may become complicated if an employee looks to leave the business and then will be committed to paying this loan off, depending on how large the sum is. Additionally, risks could develop if an employee is not able to pay off these monthly loans, and both parties suffer financially for this.
"Offering benefits such as debt management counselling or personal loans can help employees get through this difficult time," says Malia. "Personal loans can help employees ease the burden of the financial restrictions that they have, at the cost a small repayment fee every month until this loan is cleared."
Employers could also signpost employees to other sources of support that charities and websites, such as Money Advice Service, Stepchange Debt Charity and Money Saving Expert, will give via access to resources that address the different scenarios the pandemic is causing.
Although it may involve some difficult conversations and less-than-ideal scenarios, investing in financial wellbeing support now may well reap the rewards for employers when the world begins to return to some level of normality.
