How to create an integrated financial wellbeing strategy

Even the most paternal of employers will have boundaries in place around their involvement in employees’ lives. Many will still draw the line at any involvement in employees’ finances beyond the workplace benefits they offer, but there are solid reasons why employers should be concerned about improving the financial wellbeing of their workforce.

Joined up thinking

If you read nothing else read this…

  • 46% of employees worry about their finances.
  • An effective financial wellbeing strategy needs to understand the needs of employees.
  • Workplace savings and education can encourage saving and boost wellbeing.
  • An integrated strategy must link to business needs. 

Barclays Corporate and Employer Solutions’ (C&ES’s) Financial wellbeing: the last taboo in the workplace research published in May 2014 found that 46% of employee respondents worry about their finances, 18% often lose sleep worrying and 20% of employees said financial problems often interfere with their work.

Improving financial capability and wellbeing among employees increases general health scores by a far higher percentage than giving them an extra £1,000 per month, regardless of income level, according to the Financial capability, income and psychological wellbeing report published in July 2011 by the Institute for Social and Economic Research at the University of Essex.

Having low financial capability could cause employees stress, worry and, in some cases, to take time off sick from work. Cognitive psychologist and business improvement specialist Dr Lynda Shaw says: “Improving financial capability is critical on the journey to better financial wellbeing.”

Employers therefore need to understand just what financial wellbeing involves. In short, it refers to subjective perceptions and objective indicators of an individual’s personal financial status. Financial wellbeing involves having adequate financial resources, as well as the capability and capacity to make informed decisions in order to attain and maintain financial security. It also means having the motivation and resilience necessary to achieve wellbeing.

Roger Breeden, UK defined contribution and savings product leader at Mercer, says: “It’s the £64,000 question. But it’s about understanding an employee’s financial state and offer, not just to those that want it but to all, guidance and resources to help staff make better informed decisions.”

Employers looking to boost their workforce’s financial wellbeing should start by identifying the needs of their employees to get a clear picture of the key issues they are facing. This can be done through short surveys, focus groups and segmentation.

Katharine Photiou, head of workplace savings at Barclays C&ES, says: “HR directors need to understand the pillars of a strategy. For example, what are the employee’s needs? What is the business case for it? Is it engagement, productivity or risk? How can it be aligned to the [organisation’s] objectives? Then they need to develop financial wellbeing and identifying the appropriate solution.”

Tim Perkins, director of financial education provider Nudge Global, adds: “An integrated strategy means three things: first, making sure a wellbeing strategy is integrated with what the organisation is doing and integrated with the wider benefits offering such as health, pension, total reward and flexible benefits.

“It is also about good communication but, importantly, the actual content of the programme to deal with an employee’s financial wellbeing.”

Education will be the most important aspect of any financial wellbeing strategy, but looking at this in the context of an organisation’s total reward package, using this to encourage savings, increase employee spending power and provide assistance where needed, is also important.

Employee share schemes can help create a greater sense of financial wellbeing, while other savings vehicles such as a pension and a workplace individual savings account (Isa) can encourage savings to increase their savings buffer.

Meanwhile, incorporating an employee assistance programme into a strategy can help support debt management and provide debt counselling, while employers could also promote their voluntary benefits offering or employee discount schemes to help money go further.

Jeanette Makings, head of financial education at Close Brothers Asset Management, says: “A lot of employers offer something in each category, such as childcare vouchers, savings schemes via salary sacrifice [arrangements] or voluntary benefits. While increasing financial wellbeing is important [through education], a strategy should make employees aware of benefits available to use to help save money and reduce spend.”

A financial wellbeing strategy therefore should not be looked at in isolation. Given that it can be a cause of physical ill health, some forward-thinking employers have addressed this within the context of their health and wellbeing policies.

For example, Google’s wellbeing programme encompasses employees’ emotional, physical and financial health . This was launched in 2010 as an extension of its healthcare plan.

Meanwhile, BlackRock rebranded its financial education programme for US staff in April 2012 by grouping it into three financial wellness categories, one of which comprises group risk benefits .

According to Katie Nedl, global head of benefits at BlackRock, the organisation encourages its employees to think about financial wellness and plan for their goals, whether short term or long term, as well as for the unexpected.

Creating a strategy linked to an organisation’s health and wellbeing strategy should be underpinned by measures ensuring it caters to all financial health segments and life stages. For example, many employees in the early years of their career are not as likely to have the same concerns and focus around pensions or worries about ill health as some of their older colleagues. Jonathan Watts-Lay, a director at Wealth at Work, says: “Relevant education around different career stages will lead to wellbeing.

“Benefits will help to drive more value around wellbeing. Someone at 23 will not want to talk about pensions but might want to talk about saving for a mortgage.”

Introducing any new strategy will require buy-in and employers should clearly align this to business objectives, be that reducing absence through reduced financial stress, improving productivity or reducing risk to boost shareholder return.

The University of Lincoln linked financial wellbeing with its business objectives by extending some reward initiatives to its business focus: its students. Where possible, it provided financial wellbeing support across the campus for staff and students. 

“Employers should look at what it is” says Makings. “Is it to produce wellbeing around a certain benefit or benefits change or to help employees understand more to be financially well?

“Any wellbeing strategy can be aligned to what the organisation is trying to achieve. Employers can do that by setting metrics from the outset and looking at where it sits on the HR agenda or wider overarching objectives such as a more productive workforce. Only then can it be aligned with the whole strategic piece to fit with what the organisation is trying to address.”

Barclay’s Photiou adds: “If an employer is thinking about introducing this, then the buy-in is already there.

“When appealing to a finance director, talk in pounds and pence but also talk in terms of boosting engagement, improving productivity and reducing risk. Financial wellbeing with high engagement scores has greater shareholder return.”

A strong strategy, however, needs to recognise everyone is different. Technology helps employers to take a personalised approach but communications should be segmented to provide relevant information to the right people. Simple, clear, consistent and timely communications can all aid take-up and knowledge.

Nathan Long, head of corporate pension research at Hargreaves Lansdown, says: “Learning how to segment can build attractive communications. It can give information about debt management through to pension changes to the relevant people but employers do need to be careful how to pitch messages to encourage financial wellbeing, to encourage them to attend events or anything the employer puts on.”

One way to optimise take-up could be to incentivise staff. For example, at Center Parcs, more than 500 employees attended financial education seminars after it introduced an incentive scheme to boost take-up.

The most effective strategies will combine human interaction, for example between the employer and employees, or employees and providers, with a strong base of online or electronic resources, says Angus Jones, chief executive officer at independent financial advisery firm Clarity. “An online portal needs to be the hub of this process to hold the key information of an individual’s circumstances. It then becomes the norm rather than an events-based project,” he explains.

But no matter how comprehensive the strategy, employers should bear in mind that some employees may see money as something of a taboo subject in the workplace. They may be reserved about asking for help when in financial difficulty and prefer to refrain from talking about it. 

Shaw says: “People do not talk about their financial wellbeing. It is a taboo. You get some employees that are glued to it, but others, more often that not, deny it. Employers are not sure how to handle it but with the right strategy they can encourage people to assess their finances and boost their wellbeing overall.”

This means that line managers may also need training on how to deal with and talk to people with financial worries. But research by Bupa in November 2013 highlighted that line managers are too stressed and have little time to help employees deal with stress.

While the government’s plan for children to be taught about money from 2014 in all government-funded or maintained schools will go some way to help the future generation of employees, employers must step up and demonstrate a duty of care for existing generations with better financial wellbeing.

As Photiou says: “Younger generations will force financial wellbeing into the norm. They have different needs than the older generation. They want a sense of purpose and will want to work for an employer that cares. But employers need to complete the whole cycle to make a holistic approach. It takes three-quarters of the year to look at employees’ needs and building the business case. It is something that is an eight- to 12-month job. It has got to be embedded into everything the organisation does.”

Case study: Anglian Water’s financial wellbeing strategy evolves to help employees’ financial matters

Anglian Water

Anglian Water’sfinancial wellbeing strategy has evolved as the organisation has recognised the need to help employees with financial matters.

The utilities organisation has integrated financial wellbeing into its approach to employees’ health and wellbeing since 2007.

Sally Purbrick, head of reward at Anglian Water, says: “We have seen a correlation and it all integrates into the area of health and wellbeing. It is not done in isolation. All the areas join up around financial management with a theme of healthier employees. Financial wellbeing is just one of the enablers to a less stressed workforce .”

The first step of Anglian Water’s financial wellbeing strategy was a loyalty savings scheme, which replaced its share scheme after the organisation delisted in 2007.

The scheme, which is now provided by Barclays, is designed to encourage employees to save, with payments coming directly out of pay over a three-year period. The scheme is also linked to the organisation’s business objectives, which, if met, means employees receive a bonus on top of their saving.

“The loyalty saving scheme is about helping employees save for the short term, with contributions up to £250 allowed per month,” says Purbrick. “We also have a good pension scheme for the long term and we make the schemes all about good-practice money management to help remove unnecessary stress and inconvenience.”

Since its inception, Anglian Water’s offering has expanded to include hardship loans for employees hit with unexpected circumstances and water bill salary sacrifice.

To support its strategy, it also offers education with financial masterclasses for employees to help with money management, to make staff more aware of finances and other options and to build employee wellbeing around finances, mortgage deals, savings and so on.

Purbrick says: “[The strategy] has been built on relationships, research and seeing what other employers have done.

“People have personal issues [with finances] and clearly cannot perform to their best. As an organisation, we have aimed to build an initiative in times of pay freezes and low pay increases.

Financial wellbeing is about being mindful that employees do need help, and we have a way of supporting that with this focus on helping them be financial well. It might not be that they have problems but it is saying to them there can be better opportunities with the way money is managed.”

Lindsay Cook

Viewpoint: Lindsay Cook

Employers recognise that financial worries are a cause of workplace stress and that this is not restricted to those on the lowest salaries.

The higher up the pay scale you travel, the more likely it is that discussing money worries is a financial taboo, leaving these employees feeling isolated. 

One of the first things to do is to unravel where the money goes. The fact is that after tax, national insurance, commuting costs, housing, utilities and that ultimate luxury, food, even healthy salaries can look denuded. And that’s before employees layer on things such as entertainment, a car, holidays and school fees.

Acknowledging this and realising that many colleagues may be in a similar boat is a first step towards a less stressed financial attitude

Employers could also deal with work-specific spending issues, such as Friday spending and pay-day spending, effectively treating ourselves for having got through the working week or month.

This form of comfort spending is not necessarily indicative of too much work pressure or job unhappiness, but is worth exploring in a wellbeing context.

Often, people need more information about practical things: whether a student debt will affect a mortgage application, how to save enough for a deposit when they are paying rent, how to cancel a TV sport or entertainment package and pension decisions.

Given that the world is going to continue to become more financially complex, empowering employees to get the most from their pay packet works well for all.

Lindsay Cook is co-author of Money Fight Club: Saving you money one punch at a time.