Executives who earn at least £60,000 underestimate the financial abilities of lower earners, predicting that lower earners save a third as much as they do, and that they worry about money twice as much as research shows that they do, according to Wagestream’s State of Financial Wellbeing 2024 report, published today (28 October).
Researchers also found that high-earning decision-makers, when considering strategies to improve financial wellbeing at work, favour boosting financial literacy through training. But most people know the financial actions they should be taking, the report suggests. Instead, there is an action gap, rather than a lack of awareness among employees.
To address this gap, employers must pivot towards action-focused solutions, suggests Emma Stockdale, research lead for Nest Insight, a public-benefit research body. She told HR magazine: “Action-oriented and inclusive initiatives, such as automatic enrolment into pensions and emergency savings, are an essential part of building financial resilience and security for all.”
Read more: How can HR departments support younger employees to save money?
Speaking to HR magazine, Emily Trant, Wagestream’s chief impact officer, added: “Employers can create positive action around financial wellbeing by creating better access to services and support, and by making them as easy as possible to use.”
The vast majority (91%) of all (high- and low-earning) respondents to Wagestream’s polls agreed that it’s wise to save a little money, if you can. But less than half (43%) admitted to setting savings goals.
Similarly, most (87%) agreed with the statement 'you ‘shouldn’t spend what you don’t have'. Yet less than half of that proportion (39%) reported having set a monthly budget.
The report sets out three recommendations:
1. Aim to meet the ‘living hours’ standard, as set out by the financial wellbeing charity Living Wage Foundation.
2. Implement a payroll savings programme and ideally structure it on an opt-out basis so that employees build up savings by default.
3. Review workplace financial wellbeing programmes and benefits through the lens of how action-oriented they are, and prioritise providing financial security benefits that are useful and accessible for the whole workforce.
While Martin Parish, regional director of the workplace pensions and employee benefits business Johnson Fleming, described these recommendations as “sensible and viable”, Andy Wealthall, chief operating officer for the technology business Lifetime Financial Wellbeing, told HR magazine: “The recommendations are well-intentioned, but don’t fully address the root causes of financial insecurity.”
He added: “A simplistic focus on savings and financial literacy overlooks the complex barriers faced by low-income workers. Compelling people to save as a default, without addressing financial education and the cycle of short-term solutions will not yield the desired impact.”
Read more: Financial wellbeing support: Where is the boundary for employers?
Wealthall continued: “HR leaders must prioritise holistic financial wellbeing programmes that address both financial education and access to affordable, flexible financial products, guidance and advice, in cases where it is needed. If people don’t know what actions are beneficial to their own financial situation, they are less likely to implement practical solutions.”
A combination of approaches is required to plug the financial wellbeing action gap, Wealthall explained: “By implementing living wage policies, providing comprehensive financial counselling, and partnering with specialists, employers can empower their workforce to achieve long-term financial security that is relevant to their personal circumstances. But only if these measures are inclusive in nature and cover all areas and all employees.”
Another way that HR leaders can help employers address the financial wellbeing action gap is by linking this focus into existing systems, for example by including questions that are directly linked to financial inclusion in employee surveys, Parish suggested. He added: “Developing financial angles to diversity, equity and inclusion strategies might be beneficial, as might expanding robust awareness programmes to include financial inclusion.
“Furthermore, HR leaders can be proactive in bringing Wagestream’s and other research to the attention of executives at relevant forums such as people strategy meetings, board meetings or benefit governance events.”
Wagestream’s State of Financial Wellbeing 2024 report combines insights from two studies, covering 1,000 UK workers.
