How you can make your wellbeing programme complete by including financial wellness
Employees suffering from financial stress cost the UK’s businesses billions of pounds in lost revenue each year.
According to research by Barclays, a workforce facing financial pressure wipes 4% off the bottom line each year as employees take time off or spend working hours dealing with personal money matters.
And given the high debt-to-savings ratios of today’s employees, it is no wonder they are suffering.
Since the financial crisis in 2008, wage growth has been down by 4% a year. Add to that housing pressure — rising house prices are leading to mortgages that are up to nine times an employee’s salary, while tenants have been facing rental increases of 11.4% over the past five years.
UK households have, on average, £7,092 in unsecured debt, typically built up on credit cards, and more than 17 million workers have less than £100 available in emergency savings.
All of this is against a background of economic uncertainty, creating high levels of stress, which impacts productivity.
Nearly half (45%) of employees say they are suffering as a result of money troubles, and 46% say they spend between two and three hours a day dealing with their personal finances at work.
Our own research suggests that absenteeism and presenteeism — where employees are at work but not focused on the job in hand — cost UK companies as much as £57 billion.
Adopting a more holistic view on employee wellness
Investing in a workforce’s physical health has been accepted practice by employers for some time, but employers could be directing their benefit spend in the wrong direction. Our research found that 58% of employees would like to reduce the value of some benefits they receive and increase the value of others. This figure increases to 70% for those 18 to 34 years of age.
Employees have admitted that financial worries impact their health (32%), relationships (23%), productivity at work (25%) and time away from work (8%). A financial wellness programme could increase performance just as much as physical wellness; research shows that employers offering financial wellness solutions have 22% more employees who are extremely or very engaged in the workplace.
These benefits could reduce turnover costs — estimated at £30,000 per employee — while attracting new recruits and retaining the current workforce — statistics like these have encouraged 47% of employers to consider implementing a financial wellness program this year.
The strategic and the tactical
There are two main approaches to implementing a wellness programme.
The first is a strategic approach for employers who have identified long-term goals that a financial wellness programme can address. This proactive approach identifies where current employee spend is not adding value and switching benefits for targeted programmes based on a thorough understanding of the workforce’s needs.
The second approach is tactical and aims to address short-term challenges — for example, where employers have a number of employees approaching retirement who require assistance with pension freedom and choice.
The right ingredients
An effective wellness programme has four essential elements.
First is the importance of data. Drawing insights from workforce data and tracking trends over time will test the programme’s effectiveness and priorities.
Second is understanding that employees have different financial needs. An effective programme must represent the individual’s full financial picture and the breadth of circumstances across the workforce.
Third is personalisation. Individuals have come to expect guidance and communications that are specific to them. The programme must be tailored to specific employees.
Fourth is the ultimate goal: to change behaviour. The inclusion of behavioural science in a wellness programme should help people to make positive changes to their spending and saving activities.
Meeting employee needs
Mercer research identifies that employees’ financial concerns are dominated by debt repayment, preparing for the unexpected, day-to-day living costs and saving for retirement.
Based on findings by the Consumer Financial Protection Bureau, we believe that an effective financial wellness programme should help employees achieve the following:
1) Control day-to-day finances
This includes income, spending and debt. Employers could offer tools to help with budgeting and automated savings, debt management, and tax and discount schemes — for example, helping employees consolidate debts and having repayments deducted from salary.
2) Capacity to absorb a financial shock
Provide more security for employees. This could come from insurance, emergency savings plans and preparation of wills and trusts.
3) Have the freedom to make choices in life
Equip employees with the confidence to make their own financial decisions, or provide them with access to guidance or advice. Typically employees can benefit from financial planning and MOTs, advice on at retirement decisions, access to online resources, financial health scoring, and workplace seminars and clinics.
Equip employees with the confidence to make their own financial decisions, or provide them with access to guidance or advice. Typically employees can benefit from financial planning and MOTs, advice on at retirement decisions, access to online resources, financial health scoring, and workplace seminars and clinics.
4) Are on track to meet financial goals
Deliver long-term financial support. This includes your pension design, access to individual savings accounts, general investment accounts, managed accounts, a savings club and pension income tools.
Getting the message
For a financial wellness programme to add value, employers need to communicate it effectively. This requires a three-pronged approach. The first is component is digital access, which makes the most of available financial technology. Smart phones in particular can drive positive actions through timely interventions, guidance and nudges.
Second is face-to-face contact. Holding workplace clinics and seminars as well as providing access to one-to-one financial advice are effective in engaging employees.
The last component is targeted communications. Returning to the importance of personalisation, communication with employees should include personalised financial wellness journeys and roadmaps.
The right financial wellness programme has the ability to reduce stress, improve productivity and benefit an employer’s bottom line.
Today’s forward-thinking employers recognise that their employees’ financial health is just as important as their physical well-being.
In summary: Four steps to developing a financial wellness programme
1) Diagnostics: Assess employee needs and analyse the value add of existing benefits packages versus implementing a financial wellness programme.
2) Design: Build a programme that caters to both employer and employee needs.
3) Implement: Deliver the package digitally, face to face and using targeted communications.
4) Measure: Analyse the effectiveness of the programme in terms of return on investment and employee satisfaction.
Mark Rowlands is head of DC and financial wellness services for Mercer.
This article was provided by Mercer.
