Need to know:
- The workforce is becoming more nomadic. But any employee who changes address regularly can see their credit rating drop.
- Broader financial wellbeing issues can arise for employees that move jobs regularly, such as the risk of reduced pension contributions or not being able to access longer-term employee benefits.
- Employers can offer benefits to help employees stay in one place for longer, such as deposit or season ticket loans.
Life as a nomad can sound glamorous. It is a chance to explore different cities without being tied down by a mortgage. However, frequent moves can take unexpected tolls on people’s finances.
Some employees are asked to move to another city by their employer, and often receive help to do so in the form of a relocation package. Others, perhaps builders, engineers, or IT technicians, move from one contract role to the next, possibly relocating in the process.
Heidi Allan, head of insights and engagement at financial employee benefits provider Neyber, says: “We are seeing a big trend in terms of a more mobile workforce, especially with young people. Older workers tend to be more loyal to their employer and they have grown up with a job-for-life ethos. Younger employees tend to be more comfortable with shorter-term contracts and there is more loyalty to their profession, rather than their employer.
“Because it is so difficult for younger people to get on the housing ladder, by renting they are more mobile by nature.”
Yet anyone who changes address regularly can see their credit rating drop. Gaps in electoral roll or address history, or frequent switches of utility and broadband providers, can raise red flags with banks and lenders. “If [employees] have more than three credit searches in a six-month period, that can hit [their] credit rating,” explains Allan.
At present, 18% of employees do not know their credit score and do not regularly check it, according to Neyber’s DNA of financial wellbeing report, published in May 2017. Yet a poor credit rating can affect an individual's ability to buy a car, get a new mobile phone contract or a loan.
Impact on financial wellbeingThere are broader financial wellbeing issues that can arise for workers who move employers regularly. Pensions continuity is one such issue. Nigel Peaple, deputy director of defined contribution (DC), lifetime savings and research at the Pensions and Lifetime Savings Association (PLSA), says: “In the UK, on average, people starting work today are expected to have 11 jobs over the course of their lifetime. This future highly mobile workforce will thus have the challenge of how to keep track of their various pension pots. The names of [organisations] change and mergers take place so it is important that people see this as an ongoing task rather than one to look at immediately prior to retirement.
“One option that [employees] may want to consider is consolidating these pension pots [because] it can be far more efficient and easy to manage. However, it is important to check that no benefits, such as life insurance, are lost or charges are accrued.”
Individuals who move from employer to employer will also be unable to access perks like share schemes, which typically have a minimum period of three years, says Jeanette Makings, head of financial education at Close Brothers. “People are never going to be able to get the best out of any employee benefits that are medium to long term on the savings spectrum," she adds. "Even with travel loans, if [there are] employees who are moving around more than once a year, those are not going to be useful to them.”
So what can employers do to help these employees to better safeguard their financial futures?
A clearer pictureThe first step is to make sure that employees understand the consequences of frequent moves, and so are in a better position to mitigate them. “They might think, ‘Brilliant, I am going to get to move to a different town.’ But if they don’t understand all the practicalities that sit behind it, they might end up in a detrimental situation,” says Allan.
Once apprised, employees will feel empowered to make better financial decisions. “One size does not fit all, and it is not something employers can be prescriptive about,” says Allan.
She adds that employers should provide a suite of savings products, from pensions and lifetime individual savings accounts (Isas) to group income protection. These should be supported by enough information to allow staff to make decisions based on their own circumstances.
There are some employees for whom regular moves are unavoidable. For instance, some employers move new graduates around their UK offices as part of a training programme. Employers should explain the practical steps such employees can take to limit the impact it has on their credit score, says Makings. “Sometimes using [their] parents’ home as [their] permanent address can be a good idea if [they] know [they] are going to be moving around a lot in the first few years of [their] employment," she explains. "That can have a positive impact on [their] credit score and isn’t illegal.”
Other employees, especially those who are low skilled, may move jobs and homes regularly for marginal pay rises. Yet moving is expensive, and by shouldering expenses like rental deposits frequently, they could end up worse off than before.
Employers with such employees should consider offering an employee assistance programme (EAP), says Makings. “They can help people who are in significant debt or emotionally stressed, whether that be through finances, relationship, bereavement or whatever it may be,” she says.
“There are employers out there which offer workplace loans and can give assistance to try to reduce the burden financially.”
Time to commitUltimately, job-hopping individuals should be encouraged to commit, says Damian Stancombe, head of workplace health and wealth at benefits consultancy Barnett Waddingham. After all, many employers construct benefits packages with longer-term, loyal staff in mind. “The likelihood of any [employer] saying, ‘You’ve just turned up; here’s some cash to buy a house’? It isn’t going to happen,” he adds.
Employers should identify the cohort of workers they want to retain and understand why they are moving so often, says Stancombe. Next, encourage them to settle down by offering benefits that address their concerns. Employers should consider offering savings products like Lifetime individual savings accounts (Lisas) to staff, he says. Another quick win is to offer debt management via salary deductions.
Affording a place to live which is close to work can be a huge struggle for staff who live in expensive cities like London, says Stancombe. Larger employers with more resources could even consider building affordable accommodation for staff who might otherwise struggle to afford to live nearby. Such a bold initiative could inspire nomads to set down roots.
UK Power Networks counters employees’ financial struggles with benefits
UK Power Networks has just over 6,000 employees, including electricians and engineers who work across London and the east of England. The organisation’s employees cover affluent areas of London where even the country’s top earners struggle to get a foothold on the property ladder.
It is an issue that Steve Remnant, head of reward and HR services, is acutely aware of. Employees are offered a variety of benefits, tailored to help them feel more financially secure.
The organisation noticed that rental tenancy deposits were getting bigger and decided to help. “All employees who work for us who are thinking of moving, whether it is to do with their work for us or not, can take advantage of an interest-free loan to assist with tenancy deposits,” says Remnant.
“We offer a season ticket loan to help staff who live further out of London, where it is cheaper.”
Employees can also access an employee assistance programme (EAP), which offers staff counselling and guidance on issues such as financial problems and family issues. While the discussions employees have with the programme are strictly anonymous, the organisation does receive access to data on some of the themes that arise. That is how it picked up the fact that staff were looking for advice on financial wellbeing.
UK Power Networks decided to partner with Neyber to give staff access to affordable loans. “The decision is entirely the employee’s but at the end of the day if this is helpful for them, then we are glad we can offer it on behalf of the [organisation],” says Remnant.
Viewpoint: Tackle common money issues to support employees’ short- and long-term finances
The fact that there is not a job for life anymore means an inability to plan the very long term, which means employers now need to help employees think differently. A lack of financial awareness coupled with a more changeable work life means a significant impact on an employee’s short-, medium- and long-term finances.
What can employers do to support these members of staff if they are failing to protect, or are unaware of the risks to, their financial wellbeing? Firstly, think differently; do not wait. At induction, help employees think of this new job as a new financial start. This is about heart and head. Help employees address their knowledge, behaviours, and emotions around money.
Explain the government help available and the benefits on offer. This is so much more than giving a benefits guide or opening a flexible benefits window. Helping employees build on the medium and long term will help them understand the importance of future. They will also remember who helped them detox their money behaviour and the employer’s brand image will benefit in the long run. Avoid a ‘this is your pension and benefits’ session and instead have a ‘this is a good time to start a new relationship with money, which means a happier financial you’ session.
On top of short-term budgeting support, employers can help staff to clean up their credit rating, which can be damaged by too many house moves, frequent changes in circumstances and debt. Show that this can be improved by stability and simple actions; this should then help employees reduce the cost of their debt, which, in turn, makes them better able to save and protect themselves from emergencies. Adding in the benefits a good credit rating has on those that want to buy a home, coupled with Lifetime individual savings account (Lisa) information or Help to Buy, will make an employee more likely to stay with the organisation, thereby reducing recruitment costs.
Most employees are not aware they need to clean up financially before they start the mortgage process to get the best mortgage deal. This sort of help can save them a lot more than the extra few pounds they may get per week at their next 'gig'. Overcoming immediate gratification versus shaping a career and future will benefit the employee’s bottom line, and the business'.
Aiding the workforce to grasp that multiple job changes will affect their pension fund, and demonstrating that they can address this issue now they have joined the organisation is another great way to empathise. This is about being financially well, but also career-well. Be open about the “what if I leave” benefits loss and how this could affect employees in the long term. Look at how difficult the pensions industry finds getting individuals to look at their future selves, and it is clear why employers must start with the today plans for this section of their workforce.
According to research by debt charity StepChange, published in September 2014, more than seven million people lose sleep due to debt worries. Let’s get a happier, healthier and more productive workforce by tackling common money issues.
Jo Thresher is director at Better with Money and author of What’s your excuse for not being better with money?
