Even if an employee has not themselves been impacted by furlough or redundancy, their partner may have lost their job, leading to a reduction in household income. Financial wellbeing is now a familiar term in HR circles with many organisations looking for ways to support their people to improve their financial wellbeing.
So, what steps can employers take to support the financial wellbeing of their people? To address this question, we must first clarify what we mean by “Financial Wellbeing”.
Financial Wellbeing Defined
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 £10,0001. Financial wellbeing then is not necessarily about how much income a person has, but it is about how in control they feel about their finances.
Assessing Financial Wellbeing
There are many parallels between physical and financial wellbeing. Just as physical wellbeing has various topic areas such a cardiovascular, strength and flexibility, so financial wellbeing can be categorised into areas such as everyday budgeting, managing debt and saving for the future.
To improve physical wellbeing, people must take positive action. Knowing one is unfit is not enough; only exercise will improve fitness! The same goes with financial wellbeing; employees must take action.
Often employees do want to improve their financial wellbeing, but just don’t know where to start. The topic of finances is extremely daunting for many, with unfamiliar language and terminology.
The first priority is to understand where an individual is currently at with regards to their everyday budgeting, managing debt and saving for the future. What is their level of knowledge and attitude to these areas and what steps are they taking to improve? If for example an employee doesn’t understand pensions and finds the topic boring and irrelevant, it’s unlikely that they will be taking steps to improve their long-term retirement prospects.
Taking the three C’s concept of confidence control and capacity 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.
Provide a Financial Wellbeing Action Plan
There is a huge amount of content available online for employees to read, watch and interact with. From explainer videos to interactive budgeting tools and money tracking apps. In fact, there has never been so much free content available. The challenge is to encourage employees to engage with the content that is available to them.
Providing employees with a personalised financial wellbeing action plan based on their personal circumstances is an effective way to help employees to take ownership of their own financial wellbeing.
Here are just some of the actions that can help deliver improvements 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).
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.
How Gallagher can help
In order to help employers to assess and improve employee financial wellbeing, Gallagher has developed a new smart tool called MoneyFit. MoneyFit is a fast and effective tool for measuring employee’s financial wellness and highlighting steps they can take to help improve their financial wellbeing. The tool is an 100% anonymous online assessment of an individual’s personal financial wellbeing, and collectively the organisation’s financial wellbeing. It is designed to get your people thinking in an engaging way about their personal finances and helps inform areas of money management that need more focus.
The output of the MoneyFit assessment includes a financial wellbeing score, attitude to money persona and a personalised Financial Wellbeing Action Plan for each participant including resources focused on improving money knowledge, everyday budgeting, managing debt and saving for the future.
1. Salary Finance Annual Survey 2019