How to support your employees’ financial wellbeing

A decade ago, financial wellbeing was a ‘nice to have’ in HR’s repertoire of resources. Then the 2008 financial crash happened, real wage growth declined and UK household debt reached a new average high of £15,385.

Today, financial wellbeing is a major part of the HR toolkit as organisations are increasingly aware that employees who are worried about their finances are under pressure. Which makes them more likely to suffer from anxiety or stress and less able to focus on their jobs.

But what do employees want from their employers when it comes to financial support? And how can HR provide this help? We’ll answer these questions, but first let’s start by defining what financial wellbeing is all about.

WHAT IS FINANCIAL WELLBEING?

Financial wellbeing is to do with:

• Feeling as though you have enough money to meet your needs
• A sense that you’re secure and in control of your day-to-day finances
• Having the financial freedom to make choices that allow you to enjoy your life

Without enough money, employees feel out of control and under pressure making cash a major cause of stress. In recent research into financial wellbeing, the CIPD found that:

• 19% of respondents are losing sleep at night because they’re worried about money
• 30% are making uninformed financial decisions without advice or information from any source when weighing up options about saving or spending
• 58% face barriers to managing their finances including:
• lack of time
• difficulty in understanding financial products and services
• only earning enough each month to get by
• the hassle involved in taking action to save money by researching products and services

These issues translate into a negative impact on employees’ ability to concentrate at work and their productivity. Prompting employers to help their people achieve financial wellbeing.

But how do employees want their employers to support them? CIPD research discovered that:

• 75% want to earn enough money to support themselves and their loved ones with a reasonable lifestyle
• 55% want to be able to save for the future
• 54% want to be rewarded fairly for their efforts
• 45% wanted to be able to comfortably pay off their debts

The obvious way to help your people achieve financial wellbeing is by ensuring your company offers competitive rates of pay that allow employees to live comfortably.

But pay isn’t the only way to support your people’s financial wellbeing. A great way to assist staff is to offer a range of cost-effective benefits that help employees financially for the short, medium and long term.

SUPPORTING EMPLOYEES WITH THEIR DAY-TO-DAY COSTS

With the CIPD’s findings in mind, there are a number of ways you can support your staff.

Financial wellbeing – there are lots of financial wellbeing providers who will help your staff with financial education, borrowing and debt consolidation services and savings products. You might find that there’s some crossover with your employee assistance programme so check to see what you’ve already got in place.

Employee discount schemes – many employers offer discount schemes to help staff stretch their pay packets further. If you don’t have one in place, take a look at the range of providers available. This isn’t an expensive benefit but it’s a common offering in workplaces today and is particularly valuable for lower paid staff.

Salary sacrifice benefits – employees can only make the most of tax breaks if you set your benefit programmes up via salary sacrifice. Everyday costs, like cars or medical expenses can be reduced by giving your entire workforce access to the same schemes as senior staff.

Simply set up a car benefit, cash plan or private medical insurance so staff can pay for them pre-tax. Not only does this reduce their tax burden but staff can benefit from your providers’ superior buying power to secure better deals than staff could on the high street.

Look for providers who pick up the administration and have slick online systems in place to support staff.

SUPPORT STAFF TO MAKE THE MOST OF MEDIUM-TERM FINANCIAL SUPPORT

With employees’ wanting to be able to save for the future and pay off debt, you’re in a strong position to help here too.

Workplace savings – the main corporate savings vehicles are workplace ISAs, Save as You Earn and Share Incentive Plans. They help employees save as salary can be paid direct to the savings account and there are also a range of beneficial tax breaks that mean less cash goes to the tax man.

Low cost loans – with household debt levels high your staff are likely to be squeezed, particularly when it comes to footing the bill for bigger costs. Businesses are beginning to look into ways to provide low cost loans to staff so they don’t need to resort to extortionate payday loans and incur more stress. Consider asking your people if they’re in need of this kind of help. You might be surprised by the response.

HELPING YOUR PEOPLE PLAN FOR LONG-TERM FINANCIAL HEALTH

With more of us living longer, pension planning has become a real focus for many employers. Auto-enrolment means more people are saving into a pension, but the question remains whether this will be enough to ensure staff can retire when they want to.

Pensions – research indicates that employees will need a pension pot of at least £260,000 to match their current living standards in retirement. However, the data shows that the average pot of money held by 45-54 year olds is just £71,340.

How can you encourage employees to save more? Nudge theory has shown that asking employees to commit to saving future pay increases is an extremely effective method.

And if your organisation is one of the significant number of employers not using salary sacrifice to boost pension contributions, make this your first step. It will increase your employees’ pension pots and save money for your organisation too.

Supporting your employees’ financial wellbeing is a critical part of your overall health and wellbeing strategy. Make the most of the range of tax-efficient benefits available and you’ll reduce stress, boost productivity and put more money in your employees’ pockets and on your bottom line.