How behavioural insights help HR boost employee financial wellbeing

Financial wellbeing initiatives do more than improve your employees’ bank balances. When an employee feels in control of their financial health, they experience less stress and improved mental health – and by fostering this, business owners benefit from a more engaged, productive workforce.

In fact, numerous studies have proven this logic. As many as 76% of financially stressed employees admit that their situation has had negative impact on their ability at work, 35% are less focused, 61% of those under 35 admitted reduced productivity; and 83% of the workforce would more likely stay with an employer who provides financial wellness programs.

This article explores how HR can empower employees to cultivate their financial wellbeing, by addressing the behavioural drivers behind money decisions and creating strategies that resonate.

How people really make financial choices

Research shows that we make many of our decisions by rules of thumb or shortcuts that are known as heuristics. They help the brain filter multiple factors to make complex choices more easily, including financial decisions.

Here are seven behavioural insights to consider, plus actions for HR teams to take who are looking to improve financial wellbeing strategies:

1. Harness the power of defaults

People naturally stick with default or pre-selected options- a concept that underpins the success of pension auto-enrolment. Before auto-enrolment, saving rates were low despite people wanting to make smart decisions for their future. By making enrolment automatic and requiring employees to actively opt out, participation rates surge dramatically.

HR teams who recognise the benefits that best support employee’s long-term financial health should consider structuring them as opt-outs rather than opt-ins. Defaults help employees make smart decisions, boosting take-up. We are already burdened by decisions in life, why overcomplicate choices that are tried and tested.

2. Use loss aversion to motivate action

Humans are wired to fear losses more than we value equivalent gains; this is known as loss aversion. Styling communications around what employees might lose if they wait to act can be more persuasive than purely focusing on potential gains.

Stories of past employee inaction can highlight and reinforce positive behavior change.

Ideally, HR should communicate a combination of examples of what neglecting the offer could cost employees, whilst also demonstrating the benefits the scheme delivers and how it can strengthen their financial wellbeing.

3. Overcome short-term thinking

Many people prioritise short-term rewards over long-term payoffs. A well-known approach from Nudge Theory showed that inviting employees to commit a portion of future salary increases to their pension plans significantly boosted savings rates because it didn’t affect their current economic situation and spending habits.

When creating an effective wellbeing strategy, try to avoid short-term sacrifices. For example, benefit contributions that take effect automatically when salaries rise.

4. Utilise employee experience and social proof

One of the best ways to encourage any benefit is word of mouth. Employees look to their peers to guide their own actions, especially when it involves unfamiliar and stressful situations such as financial planning.

Use employees already enrolled in schemes to your advantage by:

• • Encouraging them to share their positive experiences with financial benefits
  • Highlighting respected colleagues and leadership as champions of good financial habits
  • Being transparent about take-up rates to encourage participation and build momentum.

5. Make your communication personal

People tend to engage more when communications feel more relevant to their individual situation. Personalised messaging is very effective for uptake, for example by using data to segment the audience of your workforce and address their specific needs, diversities and life stages.

Keep communications clear, concise and jargon-free, with simple advice and transparency on schemes and how to enroll. Financial planning is already complicated for many employees, offering help that is as simplistic and personal as possible greatly improves engagement.

6. Tap into values and what employees want from life

Employees are more attracted to schemes that they recognise are consistent with their values and identities. Help staff connect their financial choices with what’s most important to them and what they want to be, for example, a responsible parent, a secure retiree, or a house-owner. Pair your financial wellbeing offerings with broader company and employee values like family care or work life balance.

Additionally, when engaging employees, especially younger generations, it’s effective to encourage them to imagine their future situations and who they want to be when making financial decisions. This helps shift focus from short-term spending to long-term goals, boosting motivation to participate in benefits that support future financial security.

7. Choose trusted messengers and channels

What you say matters, but who says it and how its communicated matters more. People are influenced by the credibility and reliability of who and what delivers their messaging. Often, employees prefer guidance delivered through trusted voices or platforms and engaging formats like video or live webinars, just as they do as consumers.

When selecting financial wellbeing partners, look for providers who deliver personalised, credible content, and ideally who are evidently trusted by other organisations.

Ready to shape a financially confident workforce?

Human decision making is complex, particularly when it comes to an important and emotive topic like money. With these behavioral insights, you’re ready to conquer financial wellbeing plan design, communications and marketing, and help your employees make better fiscal decisions to reach a place of financial wellbeing.

One way to help your employees manage their finances better with is with salary-sacrifice schemes, such as Tusker’s single, monthly, tax-efficient car benefit scheme that saves employees and employers a considerable amount of money with ease.