Financial wellbeing - is it an employer's responsibility?
Legislatively, there's absolutely no requirement for employers to look after employees' financial wellbeing. From a financial perspective, all you have to do is provide a legal pension scheme and pay in the minimum contribution. However, more enlightened employers will have a different take on this. By looking after employees' financial wellbeing, there are benefits for the employer as well as the employee.
For employees, a number of positive outcomes can stem from a financial wellbeing programme. These can include improving their money management skills, allowing them to access better value products and enabling them to make more informed decisions around their finances.
As an example, it's common to talk about death in service benefits as multiples of salary. But, while an employee can do the maths to work out how much their family might receive, they may have little understanding of what this would mean if it had to be used to replace their income. Giving them this insight could mean they take out a higher multiple to ensure their family's future is safeguarded.
Reducing financial anxiety
Employers reap plenty of benefits too. As well as ensuring that employees understand and appreciate the benefits they're offered, it can also help to reduce financial anxiety among employees. This can be a major contributor to employee stress, affecting productivity and potentially leading to sickness absence. There are also reputational benefits. Financial wellbeing can lead to more engaged employees, transforming your organisation into an employer of choice.
If you're prepared to take on this responsibility, it's important to understand that there is no one-size-fits-all solution to putting a financial wellbeing programme in place. Financial wellbeing is very subjective: one employee's idea of financial bliss may be clearing their debt while another may only be happy once they know they've maxed out all their credit cards.
It's also very different to health-related wellbeing. While absence records and other data mean it's possible for an employer to have a reasonable insight into an employee's health, all you can really know about their financial position is the shape of their remuneration package.
Offering variety is key to success
Given this, offering a variety of different elements is key to a successful programme. This could range from information on the employee benefits you provide and basic financial education through to highly personalised financial advice. It can also encompass products, whether specific deals arranged for employees or discounts across a range of goods and services.
In addition, with employees likely to have very different requirements, some form of segmentation can help to make your programme more relevant and engaging.
It's also important to be aware of the potential risks if you do take responsibility for looking after employees' financial wellbeing. Offering access to financial advice or exclusive product deals could potentially backfire if an employee receives poor service or takes out something that isn't suitable. Ensuring these services are carefully selected and that you offer a broad range of options can help to reduce this risk.
Similarly, when it comes to taking responsibility for your employees' financial wellbeing, it's also important to get the balance right. Provide too much information and advice and you risk employees becoming less engaged in their own financial welfare.
After all, while it may be a smart move to take on responsibility for your employees' financial wellbeing, one of the best possible outcomes of any programme is that it helps them take more responsibility for their own finances.
Martin Parish is pension consulting lead at Aon Employee Benefits.
This article was provided by Aon Employee Benefits.
