Supporting everyday financial wellbeing in a changing economic climate

financial wellbeing
  • Employers are experiencing increasing demand from employees for salary rises because of the pressures on everyday financial wellbeing, such as the ever-rising cost of living, inflation and interest rates.
  • Employers can offer their workforce support on how to save by utilising their workplace benefits, including discount schemes and budgeting tools.
  • Financial education can be key to helping employees build future financial resilience.

As a result of turbulent economic times, many employers have stepped in to offer some form of financial support for their workforces, such as pay rises, one-off cost-of-living payments or an enhanced financial wellbeing package. Indeed, data from global recruitment agency Phoenix published in January 2023 revealed that 94% of the UK workforce believe they should receive a pay rise to meet financial challenges over 2023, highlighting that the everyday financial wellbeing of staff is in need of being supported.

Current financial issues

In addition to the ever-rising cost of living, inflation and interest rates, some employees may also be paying back debt from Christmas or last year on credit cards, overdrafts and buy-now-pay-later facilities. All the while, rising energy costs are likely to increase again this year, creating mounting pressure on the everyday financial wellbeing of employees.

For some, nearing the end of their fixed-term mortgage will be an added concern, as the new fixed rates being offered across the mortgage market are likely to be double what they had before, resulting in much higher monthly outgoings, while those who rent are seeing these increases being passed on from their landlords.

Meanwhile, the Office for National Statistics (ONS) report Public opinions and social trends, Great Britain: household finances, published on 13 January 2023, found that 13% of people between the age 30 and 49 had a direct debit, standing order or bill they have been unable to pay in the past month, and 4% of the same age group had reduced or cancelled their pension contributions in this time.

The cost-of-living problem is so large that it impacts all the key areas of financial wellbeing, such as everyday spending, saving, borrowing and planning, notes Andreas Hunter, employee benefits consulting lead at Buck.

“Employees are asking for help for acute issues around spending and borrowing,” he says. “If the number of people cutting their pension contributions continues to creep up, then we also need to address concerns about people’s ability to plan for their future or saving for medium terms goals.”

How employers have been supporting staff

To counter these issues, some businesses have offered short-term support with salary increases and one-off payments, but these may be unaffordable as an annual occurrence if the rate of inflation continues to rise. Organisations understand that they have to do more for their employees, but businesses themselves may be facing tightening margins, and some will be in a better position than others to provide more funds to staff.

Nevertheless, many employers are looking for ways to alleviate the financial burden placed on employees, believing supporting financial wellbeing to be an integral part of creating a healthy workplace, according to Jonathan Watts-Lay, director of Wealth at Work.

This might mean providing specialised cost-of-living financial education, covering how to budget, what government support is available, how to reduce costs and ways to manage debt during this difficult time.

Watts-Lay says: “This support is invaluable to help employees navigate their finances during turbulent times but also with providing them with skills and the know how that they utilise in the long term.”

Personalised financial wellbeing solutions can also provide employees with the understanding and actions they need to take control of short-term finances, while still planning for a comfortable retirement.

Employers realise that people need the tools and knowledge to navigate their way through the crisis, and for their future. Webinars that include education on budgeting, reducing costs, consolidating debt to reduce payments, maximising income, applying for state benefits and grants, as well as making the most of employee benefits are also being offered by employers, comments Sarah Steel, head of financial wellbeing at Better With Money.

“Many employers have been offering financial one-to-ones for their staff through financial wellbeing providers on a non-advice basis,” she adds. “This really gives someone the opportunity to talk to a financial expert in confidence and without judgement around their own situation.”

Managing day-to-day

Employees can save on a day-to-day basis by utilising their workplace benefits, such as discount schemes, help with financial planning though debt support, salary sacrifice schemes to help reduce costs for travel, mobile phones, gym passes, and health cash plans, where money can be claimed back for dental treatments, prescriptions, reflexology and counselling, to name a few.

Retail discount schemes could be particularly helpful in addressing the rising cost of essentials, such as food shopping, as well as helping staff continue to enjoy luxuries, at a time when they might not be as willing to spend on them.

“Wage-forwarding or debt assistance options can also be helpful,” Hunter adds. “An unexpected bill here can lead to a missed payment there, which can leave employees paying off fees and charges covered by a credit card with minimum payments. This could lead to people paying off debts for years. With better awareness of alternatives, employers can help people avoid spiralling out of control.”

Other everyday saving hacks include checking all outgoings to find other ways to save money, such as cancelling unused subscriptions or memberships, shopping around for better deals on car and household insurances at renewal, as well as broadband and mobile suppliers, and switching grocery brands.

“Rising energy costs are a big concern, so things like avoiding tumble dryers, utilising smart heating, using more efficient light bulbs and finding cheaper ways of cooking such as using a slow cooker can all help,” says Watts-Lay.

All of this can be included in information, tips and education provided to staff, at relatively low cost to the employer.

Meanwhile, online financial wellbeing applications allow staff to take control of their daily finances as well as understand their longer-term plans, enabling them to take action now.

In order for these benefits, tips and money management tools to be helpful, employees need to be taken on personalised journeys, being presented with modelling and experiences that are relevant to their situation, age or salary level, says Daniel Gillett, business development director at MyEva Financial Wellbeing.

“This helps them create positive, long-term changes to their short and long-term financial wellbeing,” he explains. “The offer of one-to-one sessions with financial advisers, whether that be for guidance or advice, is also a key aspect for support.”

Financial knowledge

Financial education can be key to helping employees build future resilience. It is important to help them understand all the available support being provided by the employer and government, as well as what they can do themselves to manage their money more effectively. Examples of this include budgeting, reducing costs, planning meals effectively, reducing wasted spend, boosting income, getting into good money habits and making the most of employee benefits on offer that support financial wellbeing.

The government’s Help for Households website outlines grants and payments available during the cost-of-living crisis, including the energy grants for every household in Britain, and cost-of-living payments for people on Universal Credit.

Giving people this knowledge will help them to build financial resilience both now and in the future, says Steel. To this end, some employers have put together cost-of-living toolkits and information packs, including topics such as how to be more energy efficient to reduce bills, how to remortgage to get the best deal, and which employee benefits can help them at this time.

“These are the benefits that should really be coming into their own now to help people save hundreds of pounds a year, but in order to get these widely known, an effective communication plan is needed, otherwise take-up is limited,” she adds.

Above all, employers should be open with their staff about the current challenges, helping them to understand all the benefits in place that can support their financial wellbeing by communicating effectively and frequently, as well as listening to feedback from employees about what they need during this difficult time.

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