Good money: Financial wellbeing top tips

The financial wellbeing of staff is of growing interest to employers. So how can they help staff look after the pennies?

Christmas may be the most magical time of the year – but it’s also the most expensive. Research carried out by GoCompare in November 2016 showed that the average British household expected to spend £753 on last year’s festive season.

Since then real pay has fallen, with average wage increases failing to keep pace with inflation. Thinktank the Social Market Foundation calculated in September that the average worker is now £309 per year worse off than they were a year ago, pointing to a lean holiday season.

And financial worries are not just for Christmas. A 2017 study by workplace loan provider Neyber, The DNA of Financial Wellbeing, showed that the UK’s workforce is struggling at every level. Almost half (48%) of all employees are having to borrow regularly to meet their basic financial needs, and a quarter have an income that fluctuates by at least 10% each month.

That uncertainty over money matters is having a knock-on effect on employees’ mental health and their productivity at work. In research carried out earlier this year the CIPD found that 19% of workers have lost sleep worrying over money matters, and 10% had found it hard to concentrate at work or make decisions.

It’s no surprise then that financial wellbeing is one of the fastest-growing areas of wellbeing at work. But employees are not yet all feeling the effects. In the study referenced above, Neyber also surveyed 500 HRDs. It found that three-quarters of HRDs believed their company cared about employees’ financial wellbeing, but only 39% of employees said the same.

There could be any number of reasons for that disconnect. Communications are the obvious candidate, but it could also be that what is on offer isn’t perceived by staff as helping them financially (such as pension contributions
when they are struggling with everyday bills) or hasn’t been labelled as financial wellbeing (for example support with debt worries through an employee assistance programme [EAP]).

A clear definition of financial wellbeing is an essential starting point. This isn’t just about saving (or being paid) more and spending less – it is about helping employees to take control of their money, building financial resilience, and creating a monetary safety net should the unexpected happen.

Look at your employees’ lifestyles

As with most other aspects of wellbeing, different parts of a workforce will have varying financial needs, and will require different types of benefit. Shopping discounts of 5% or 10% might seem irrelevant to senior managers, but those savings added up over time could finance Christmas for lower-paid workers. Employees in London or the South-East might be struggling with housing or transport costs, so supporting them with season ticket loans or short-term finance to cover the deposit on a rental property can make a significant difference.

Anonymised feedback from EAPs can help to identify trends in your workforce, even if it won’t reveal which individuals are struggling.

“We know how significant financial matters can be as a stresser, and we see it coming through in our workforce,” says Ian Hodson, head of reward at the University of Lincoln, which has developed a financial education programme with provider WEALTH at work. Hodson adds that the university has worked to raise awareness of its EAP, “and if people are in financial difficulties that it is flagged up and supportive mechanisms discussed.”

Investigate affordable loans

A problem for many employees is financial exclusion – the inability to access well-priced loans or other products, usually as a result of a low credit score. That means the poorest workers are often exposed to the highest interest rates, or are even tempted to approach payday lenders or loan sharks. The rise of workplace loans, offered at affordable rates through the employer and recouped through payroll, can provide a more cost-effective and safer lending environment for staff. Existing loans could also be consolidated to further help employees with debt.

It’s also important to look at the underlying reasons an employee is in debt in the first place. Consolidating debt at work isn’t effective if the individual simply goes out and
starts taking out new loans outside the workplace.

Offer financial education

One of the reasons employees’ debt may have accumulated in the first place is a lack of understanding about how to budget, how to create a safety net, or even about essentials such as checking credit scores.

Financial education goes hand in hand with financial wellbeing. However, making sure that it’s holistic, rather than tied to a single product such as a pension, is crucial. “Are the right people delivering the messages?” asks Jeanette Makings, head of financial education services at Close Brothers. “If a provider just talks about pensions they won’t discuss tax efficiency across all savings, for example.”

New research by Close Brothers, The Lifetime Savings Challenge 2017, shows that 42% of the 2,000 employees it surveyed found the savings landscape confusing. And, even among those who have taken up savings products such as pensions and ISAs, people are confused about how to prioritise and make the most of their money. “People are saving, but they might not be putting money away in the most efficient way. It’s also about understanding how to join the dots up,” says Makings.

Look at the long term as well as the short term

While pensions might seem like the last thing on employees’ minds when they are struggling with everyday finances, getting staff to think about the long term is also a core part of financial wellbeing. When it comes to creating messages that encourage people to save for their pension, positivity wins every time. “Doom and gloom tactics do not work,” cautions Hannah Lewis, director of behavioural science specialists Behave London. “In fact, for most members a negative message is a total turn-off. The [pensions] industry is trying to scare people into saving, and research points to that being the worst tactic you could use.”

While auto-enrolment might mean many more employees are now saving into a pension, inertia has played a large part in that process. And that may mean they are not really even aware that they have a pension. Roy Porter of master trust The People’s Pension says: “Many members are disengaged and don’t know they are in a pension. A lot of people just don’t know what they’ve got.”

Don’t forget high earners

While it’s easy to assume that financial wellbeing is just about helping low earners, that can be far from the full picture. Higher earners may be just as much in need of support. According to the CIPD’s research, 20% of employees earning between £45,000 and £59,999 and 14% of those with an income of £60,000 or more report their work performance has suffered as a result of financial worries. “Financial wellbeing and debt problems are income-agnostic,” points out Brian Henderson, head of DC and financial wellness at Mercer.

“Companies are now looking at what employees’ needs actually are, rather than what they think they
are,” adds Henderson. “There is increasingly a more strategic approach to financial wellbeing, particularly around adding structure and consistency.”

He concludes: “Employers really do want to support employees. There may not be sufficient money to pay them more, but companies are keen to help staff better manage their finances and make the link with mental health.”

Creating a coherent strategy that brings together existing financial benefits, helps employees understand how to use them to best effect, and supports those struggling with their finances are some of the key components of making financial wellbeing work. It’s not just employees who benefit. Assisting staff to feel more comfortable with their money can help reduce sickness absence caused by money worries and help to boost productivity for employers as well.

Christmas is as good a time as any to start. Helping employees to budget, monitoring EAP calls for signs of debt, and offering access to loans through work could all help to ensure that 2018 starts off on a firm financial footing.