Financial Wellbeing: Is Now The Time To Create A More Formal Strategy?

During April it has been Stress Awareness Month. And one of the major contributors to stress levels for many people can be financial worries. Yet while many organisations are supportive when it comes to their employees’ wellbeing in general, it appears that they are not doing as much when it comes to helping with their financial wellbeing. Has the time come for that to change?

A recent report from the CIPD has shown that around half of employers surveyed don’t have any kind of formal financial wellbeing strategy in place. That figure increased to 64% in some of the lower paid sectors such as hospitality and retail. A similar pattern was identified in Aon’s UK Benefits & Trends Survey 2021, which found that only 41% of respondents had a defined financial wellbeing plan in place.

Up until now, many employers seem to have taken a fairly ad hoc approach when it comes to helping their employees with financial wellbeing. Companies might feel that as long as they fulfil their obligations by ensuring an employee is paid correctly and on time, they have met their obligations. Some employers might be concerned that efforts to involve themselves more in their employees’ financial circumstances could actually be perceived as intrusive. These are valid considerations. But the case for more involvement is growing.

With money worries being one of the biggest contributors to stress, now more than ever it seems there’s an increasingly compelling case for employers to step up and create a more defined strategy to help their workforce with their approach to financial management. There does appear to be an appreciation of the size of the problem by employers: the CIPD survey revealed that 68% of respondents believe the pandemic has had a negative impact on their employees’ financial wellbeing. Increasing numbers of employees are facing debt problems and might have experienced an overall reduction in their finances due to furlough, reduction in pay or hours and other household members losing their jobs. These are issues that are affecting everyone across the board.

While wellbeing is a term that’s being used to such an extent that it’s in danger of people starting to tune out, the need for companies to take proper care of their employees in as many ways as can reasonably be expected can’t be ignored. It’s becoming increasingly apparent that employers can have a positive impact on their employees’ overall wellbeing by supporting them with this particular aspect of it.

And there’s sound business logic in doing so – employees who are worrying about their finances are far less likely to be giving it their all when it comes to work. The Money and Pensions Service highlights the fact that eight out of ten employees take their money worries into work – and that has an impact on the quality of the work they do. It estimates that 4.2 million days are lost annually because of a lack of financial wellbeing.

Last year it launched the UK Strategy for Financial Wellbeing, an ambitious ten year plan to help people learn how to make the most of their money and pensions. An integral part of the strategy involves input from employers. Employers are in a unique position where they can nurture a range of behaviours in their employees to support money management skills.

With around half of employers yet to embrace the creation of a formal financial wellbeing strategy, there is a big opportunity here for organisations to choose to take a more active role as part of their work to support wellbeing in general.

• Support greater financial literacy and normalise financial wellbeing conversations

For some employees, simply starting to have conversations about how to make the most of their money can be a significant step forward. Enabling greater financial literacy often starts by educating on the basics, such as budgeting skills, and then signposting them to all of the reputable free resources, tools and support services that are available. It doesn’t have to be complicated – it could start with a dedicated page on the company intranet and grow from there with webinars and seminars offering more detailed guidance.

• Consider introducing workplace saving schemes

Could you explore the possibility of introducing a workplace saving scheme? Recent research from the Money and Pensions Service and The Financial Inclusion Centre shows that saving through a work payroll scheme can have a really positive impact when it comes to establishing good saving habits.

• Provide salary sacrifice schemes

Salary sacrifice schemes can help employees get more for their money by enabling them to choose to exchange part of their income for specific benefits. That then reduces the amount of tax and NI they pay while enabling them to access the particular benefits they want – such as childcare vouchers for example.

• Talk to employees about pensions

While most people will be more concerned with the “here and now” issues relating to their financial circumstances, tie in efforts to engage employees with pensions as part of an overall longer term financial wellbeing strategy. Pensions are recognised as a subject that many employees are not very enthusiastic about – but it’s important that they understand the implications for them.

One important consideration that’s relevant right now relates to raising employee awareness specifically on the subject of pension scams. Despite positive progress in this area over the past few years, £1.8 million is estimated to have been lost to scammers already this year. In the period since April 2017 until last summer, it was reported that over £30 million had been lost in total. Employees should be alerted to the risk and advised what to do if they are approached.

An effective financial wellbeing strategy needs support from robust payroll and HR processes and systems. If you are currently considering how you can make improvements in those areas, and would like to learn more about our HR software, payroll software, outsourced payroll services and workplace pension management, please contact us today.