How a financial wellbeing strategy can cut your costs

Employers can’t afford to ignore the impact of money worries on the workplace

How a financial wellbeing strategy can cut your costs
Employers can play a role in rescuing staff from financial stress. Image: Getty

In brief:

  • A study last year found that 55% of people were less able to perform at work because they were facing financial pressures.
  • There’s a sound business case for a robust financial wellbeing strategy.
  • Strategies need to include practical support and look beyond immediate problems
  • There are inexpensive solutions such as hosting support materials on the company intranet.

Money worries are an epidemic sweeping the country: over a quarter of employees feel less financially secure now than they did at the start of 2016, according to the CIPD.

This epidemic is every bit as dangerous to business as a health crisis. It can damage productivity, spread workplace stress, cause absenteeism, and even trigger anxiety and depression. Employers, therefore, need a robust financial wellness strategy to ensure the workforce is immunised against the threat.

Financial concerns have been flourishing in the economic gloom that’s enveloped the country since the global financial crisis. A combination of insecure work, depressed wages, rises in the cost of living, sky-high property prices, mounting debts, and concerns about pensions have all brought money worries into sharp focus.

Why should employers care?

Employers would be forgiven for thinking that an employee’s personal finances are none of their business, but they can’t afford to ignore the impact it is having in the workplace. When employees bring money worries to work, it takes their mind off the job in hand, and damages productivity.

According to the CIPD, one in four workers say that money worries have affected their ability to do their job, while a study by Neyber last year found that 55% of people were less able to perform at work because they were facing financial pressures.

In some cases, employees feel unable to face the workplace, so money worries increase stress-related absence. Last year, Willis Towers Watson looked into the issue and found that those suffering high levels of financial stress were absent for an average of 6.2 days a year – compared to 3.8% of those with low financial stress levels. In extreme cases, this can contribute to mental health issues. The Neyber study found that 44% of women and 34% of men in the workforce have felt anxiety caused by financial stress.

Slipping into a vicious circle

The path from money worries to poor health and low productivity isn’t just a one-way street. When financial concerns lead to poor health, it can cause so much absence that it causes a loss of income. This, in turn, leads to more money worries. Likewise, poor health can lead to poor productivity, which causes stress over the work that’s not getting done, and in turn leads to more poor health.

Clearly there’s a sound business case to be built for halting this vicious circle, and establishing a financial wellbeing strategy. Part of the process involves examining pay and reward policies, to ensure they are fair, consistent, and meet the minimum required by legislation.

However, increasing pay is not a solution in itself. Duncan Brown, Head of HR Consultancy at IES says employees across the income spectrum report financial stress. As their pay increases, their lifestyle becomes more expensive, and they require more pay to keep them afloat financially. The solution is therefore not purely a matter of pay, but one of support.

Beyond salary

Practical help needs to be part of the picture. For employees who have reached a crisis, an employee assistance programme can be a lifeline. In fact, Brown says that many EAPs are becoming almost full time debt assistance helplines.

Employers can offer benefits to help staff make the most of their money – negotiating discounts on everything from insurance to gym membership. They can also provide real flexibility through the benefits package, to direct the employer investment to where it is most needed and appreciated. 

What happens after immediate problems are solved?

These practical solutions must not simply focus on dealing with an immediate debt or cash flow crisis, because employees need help building financial resilience too. According to a Money Advice Service study in 2015, only 28% of people have a savings buffer equal to three months’ income, which means a setback can cause serious financial concerns. Worryingly, 40% feel they don’t have good control over their money, which means those setbacks are more likely.

Employers can offer access to saving schemes or workplace ISAs to encourage employeesm to build this safety net. They can also look at offering income protection or critical illness cover either as standard or within a flexible benefits programme, in case employees become too ill to work.

Don’t forget retirement

The strategy also needs to look ahead to retirement. A study by Willis Towers Watson last year found that over half of employees don’t believe they’ll have enough money left 12 years into retirement. Employers therefore need to review pension provision to ensure it can provide an adequate income in retirement.

In order to ensure employees make the most of all of this practical help, they also need education and support. As Brown simply says: “People don’t understand the basics.”

Practical solutions

Part of the solution is in communication. Brown says employers can maximise the value employees get from their benefits by careful, regular, tailored communications, This, he says, means moving away from a “once a year mega-choice, because then 99% of employees will chose the default option.”

One effective approach is to harness significant life events such as getting married, having children or approaching retirement, using them to encourage employees to engage with financial issues and understand the relevant benefits in the package. Line managers can highlight when employees should be receiving these communications. Workplace champions can also be effective  if you can identify and mobilise savvy and credible staff to spread the message, it's a powerful way to communicate benefits.

This will enable employees to appreciate the benefits on offer, but in order to make the most of them they also need financial education. It can involve bringing experts into the workplace, to offer seminars, face-to-face meetings or workshops. These can be paid for, subsidised, or simply facilitated by the employer. They may provide general help such as advice on budgeting, or tailor guidance for specific groups – such as a mid-life MOT or a pre-retirement session.

Assistance needn’t be expensive

Where bringing advisers into the workplace is impractical, employers can look to the intranet. Useful information can be hosted online, or it can provide links to existing information from organisations such as the Money Advice Service. Brown says that simply providing access to this information can be effective. He is currently working on a piece of research following three organisations as they provide access to financial information and he says: “The initial findings are really good.”

A financial wellbeing strategy therefore need not be expensive. In return, there’s an opportunity to improve appreciation of the benefits package, as well as employee health, attendance, productivity, and engagement. As Brown says: “Once benefit professionals can show the benefits of a financial wellbeing strategy, and that the solution can be found relatively cheaply, I’d be surprised if they find much resistance.”

Saturday 19 August 2017
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