Q&A: how to support workplace financial wellbeing
The link between debt, money worries and stress, lower productivity and absenteeism are increasingly recognised by employers and many are now looking for ways to support their employees. With this in mind, here are some key questions and answers around how to support financial wellbeing in the workplace.
Why is financial wellbeing an issue?
It’s not uncommon for individuals to face financial worries at various stages of their life – whether that is dealing with debt, concerns over retirement savings or making the monthly budget work.
With nearly half (46%) of all UK adults rating their own knowledge about financial matters as low and almost a quarter (24%) having little or no confidence in managing their money, according to the FCA’s Financial Lives Survey (2018), financial wellbeing is certainly a topic that needs more attention.
How does this affect the workplace?
The impact of poor financial wellbeing can be especially devastating for employees and have a direct impact in the workplace. Our Wellbeing in the Workplace (2018) research found that 78% of employers believe that financial worries cause increased levels of stress, 43% believe that it results in lower productivity, 31% believe that it leads to absenteeism, and 22% believe that it leads to a high staff turnover.
How can employers make a difference?
Employers can play a big part of the solution in terms of providing employees with access to knowledge to make informed financial decisions throughout their career. Helping employees become more familiar with the basics of money management and getting them to think about how they spend money on essential items such as utility bills and insurance is paramount. For example, when renewing car insurance individuals should always shop around as the renewal quote from their current provider is unlikely to be the best deal.
Another important principle is helping employees understand the difference between good debt and bad debt. For example, a mortgage is a form of good debt – it makes sense to have a loan in order to own your home as it is a stable, easy to manage approach to long-term borrowing. However, it should still be reviewed occasionally to ensure you have a good deal.
At the opposite end of the spectrum, debt with high interest payments such as payday loans and credit cards can get out of control if they are not repaid quickly. The cost of paying the interest may force someone into even greater financial difficulty. Having a good understanding of how different types of loans work can help ensure informed decisions are made.
It’s also important to look at the employee benefits platform itself. A good starting point is to investigate if employees are taking up and using the benefits on offer. And if not, why? Is it because the benefits aren’t appropriate to the workforce, or are employees unable to understand either the way the benefit operates, or how it could help them? Making sure benefits are relevant and well-explained can really help take-up and improve personal money management.
Key to all this is financial education. Employers are now increasingly putting in place financial education seminars and digital support to help their employees understand all of these issues, as well as one-to-one financial guidance or regulated financial advice for those who need more detailed help.
Do employers have a responsibility to ensure employees can afford to retire, and what can they do to help?
One of the most crucial elements of employee financial wellbeing is retirement preparation. Our Focus on Retirement Income Matters (2018) research found that a staggering 80% of employers believe their employees are not saving enough for retirement. This may in part be because of affordability, which is why money management is so important, but it may also be that they do not understand the upside such as employer matches on pension contributions and tax relief.
In addition, many need support at the point of retirement so they understand what options are available to them and the best way to generate income in retirement given their personal situation. Again, employers can plan a key role here by putting in place services such as financial education, guidance and regulated financial advice to support employees.
How is this likely to develop in the future?
Our recent poll of employers found that 90% of respondents believe that it’s becoming increasingly important to have a financial wellbeing strategy in the workplace. It’s great to see that so many employers are recognising the increasing importance of having a financial wellbeing strategy in place to help their employees feel financially secure.
The author is Jonathan Watts-Lay, Director, WEALTH at work.
The article is provided by WEALTH at work.
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