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12 Mar 2021
by Heidi Allan

How Covid-19 has changed employees’ spending priorities and what that means for financial benefits

Covid-19 has had a huge impact on all our lives. It’s shaken up families, friendships, work and our social lives. It’s also had a significant impact on the financial wellbeing of millions of people across the UK. The last year has seen some of the most rapid changes in consumer spending that we have ever seen. 

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Spending on everyday items has declined dramatically as people adjusted to life with the pandemic restrictions. For some, these changes were because of the impact of closed shops and restricted travel opportunities; for others, they were the inevitable consequence of financial instability and concern about future financial prospects. 

Shifting spending habits

Our latest LCP research Employee wellbeing: the changing dynamics of financial health found that one in three people  spent more on groceries, which makes sense when time at home increases and many have taken to home cooking as an alternative to eating out. We also found significant spending reductions in other areas affected by restrictions: seven in 10 spent less on holidays; two in three spent less on meals out and coffee; and half spent less on clothing and everyday transport.

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Even the way we make our purchases has changed with the rapid progression in contactless payments – many consumer purchases can now only be carried out via technology rather than cash. These changes have also had a huge impact on spending behaviours and will mean a change in money management mindset going forward. 

What do I mean by that? Before Covid-19 many of us used physical money or cheques to buy things. Making a decision to purchase something was a mindful act and we inherently had the ability to weigh up ‘wants’ versus ‘needs’ when deciding where our money was spent at that moment in time.

Contactless spending through apps, devices and cards makes it very easy for us now to just ‘tap and go’, and small spending can really mount up quickly without thinking about it too much. This can lead to spending more than we really should, often indulging in more ‘wants’ than ‘needs’.

The pandemic has required reactive behaviour changes rather than proactive conscious decisions. This can be difficult for many people to adjust to and they can be left feeling vulnerable, anxious and unsure of how to cope for the longer-term.

The consequences for employee benefits

The workplace, and employee benefits, are often the main source of support for many employees – so what do these behaviour changes mean for workplace benefits? Do employees know what they have available, do they understand their benefits and do they value the support they have?

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In our latest survey, we were not surprised to see pensions remain the most valued, and most widely available benefit to employees.

Flexible working followed closely behind for value to employees which, given the turbulent and uncertain times we are living in, was not a surprise either.

We then see a selection of traditional benefits being valued by around half the workforce although not available to all.

This is followed by more ‘modern’ style benefits being valued by more than two in five – financial education, workplace savings and mental wellbeing support appear here.

A number of these benefits may not have everyday value – but they really come into their own when someone needs support. We refer to these as ‘moment in time’ or ‘situational’ benefits – you could include life cover and critical illness in this category, as well as money management style benefits. They may not be needed by everyone everyday but for those that require their output, they can be life changing. The value add for employees is having access to them should they need them.

Key benefits considerations

Here are three key areas of consideration for anyone reviewing, or considering reviewing their employee benefits offering for their workforce:

  1. Understanding employee needs – do you know what challenges your workforce are facing? Without knowing the pinch points and areas of concern, you could be spending on benefits that aren’t valued or useful to your employees.
  2. Access and awareness – are your benefits spread across multiple places or are they easy to find and access when employees need them? Are there conflicts in provision from different product providers who may offer cross-over support?
  3. Communication and understanding – do your employees know what’s available to them? Do they understand what they have access too? Do they need support in managing their money to build their confidence and capability?

There are many different ways of helping employees and it’s important that you understand your unique workforce and you support them in the way that fits with your company values. Do all of your benefits support the wider company objectives?

The author is Heidi J Allan, senior financial wellbeing consultant at LCP.

This article is provided by LCP.

In partnership with LCP

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