It’s fair to say that more people than ever are facing financial stress with many employees struggling with the uncertainty of long-term reduced household income. A study by Opinium research found that 54% of employees believe that Coronavirus will have a negative impact on their personal finances and 35% are worried that they will lose their job as a result of the pandemic.1
So how can employees adapt their financial wellbeing strategy to meet changed employee needs?
To address this question, we must first clarify what we mean by “Financial Wellbeing”. There are multiple definitions, but they all have a common theme, summed up by the three C’s’ of financial wellbeing
- Confidence – to make informed decisions about money
- Control – of everyday budgeting and spend, debt, short-and long-term savings
- Capacity – to absorb a financial shock such as an emergency cost or redundancy
Employees who are confident, in control and have capacity have lower money stress. A lack of confidence, control and capacity leads to higher stress and the associated mental health challenges.
And let’s not assume that those with higher earnings have higher financial wellbeing; a study by Salary Finance found that those earning over £100,000 reported the same level of concern about their personal finances as those earning less than £10,000.2
Taking the three C’s concept further, we can identify the interventions that help increase financial wellbeing. It is widely recognised that knowledge builds confidence, planning helps to create a sense of control and a savings buffer helps to absorb a financial shock. Any financial wellbeing strategy then should include knowledge building, budget planning and savings support.
How have employees’ needs changed?
Employees’ financial needs vary depending on their life stage. A recent graduate will not regard retirement planning as a priority, whereas a 52-year-old will be far more engaged with communications from their pension provider.
These variations in needs mean that a “one-size fits all” approach to financial wellbeing will be less effective than targeted interventions based on each employee’s personal circumstances.
To achieve an improvement in financial wellbeing, employees must take positive action. Like physical wellbeing, knowing one is unfit is not enough; only exercise will improve fitness! The same goes with financial wellbeing; employees must act.
Providing employees with a personalised financial wellbeing action plan based on their personal circumstances is the most effective way to adapt a financial wellbeing strategy to meet individual employee needs.
Here are just some of the actions that can help deliver sustained improvement in financial wellbeing:
- Build knowledge - there are some excellent free knowledge building resources available that cover topics including money basics, debt, savings and tax. See for example the Money Advice Service Website and Facebook Group (with over 10,000 members) https://www.moneyadviceservice.org.uk/en
- Promote your employee benefits - many employees don’t fully appreciate or understand the money saving benefits on offer to them. Refresh your benefits communications, run a virtual benefits roadshow, and create a network of champions to promote your money saving benefits
- Signpost to help and support – employees that are struggling with debt will benefit from professional debt support. Signpost employees to one of the many debt support organisations available and ensure that your Employee Assistance Programme has a robust debt support solution
- Give employees time to act – why not give your employees a “Money Hour” to dedicate to focusing on their personalised financial wellbeing action plan? A leading engineering firm sent all their staff a sachet of coffee, encouraging them to “have a cuppa on us” and focus on their pensions
- Provide tools that encourage good habits – from a workplace savings scheme to retirement planning, there are some great tools available that help your employees to make informed decisions about their money
Despite the current challenges, the good news is that employers can take positive steps to improve their employees’ financial wellbeing. This in turn delivers long term improvements to organisational wellbeing, benefiting both employers and employees.
- Study of over 2,005 UK citizens focusing on the impact of Covid-19 by Opinium Research 2020
- Salary Finance Annual Survey 2019