Why employee financial wellbeing really matters

Employee wellbeing has increasingly been thrown into the spotlight. Recent reports highlight the challenges and potential repercussions both globally and for the UK market if employers do not have a plan to tackle this important subject.

The UK government commissioned a report entitled “Thriving at Work” which evaluated what employers can do better to support their employees. The report found that poor mental health, including anxiety, stress and depression, is estimated to cost employers between £33 billion and £42 billion a year, with an annual cost to the UK economy of between £74 billion and £99 billion.

The report goes on to state that of the 526,000 workers who are estimated to suffer from work-related stress, anxiety and depression, 44% of cases are thought to be caused by employee workload.

Further analysis, however, suggests that binary, isolated causes cannot be attributed to these statistics alone. In reality, it is thought that a combination of factors affecting employees, both inside and outside the workplace, dramatically affect employee happiness, wellbeing and ultimately productivity. One of the contributory factors is financial wellbeing.

“Four in ten UK adults have no more than £500 in savings, whilst the Office of National Statistics suggests that 16.5 million people of working age have no savings at all," said Paul Barrett, head of wellbeing, Bank Workers Charity, in January 2017.

"Many have little in the way of a safety net, meaning an unexpected turn of events, like a redundancy or a serious illness, could tip a huge number of families into crisis. So perilous are people’s finances that even a 2% hike in interest rates could be enough to push many over the edge," he said.

The wider impact

On an individual level, these money worries can impact a person’s mental health, their relationships, their physical health and more. For employers, however, these problems add up also.

Research conducted by Barclays in 2014 from a universe of 100 employers and 2,000 employees, suggests that almost half of employees worry about their finances in the workplace, with 1 in 5 losing sleep at night as a result. This leads to a 4% diminishment in productivity, which ultimately impacts the bottom line.

Furthermore, 5% of surveyed employees were absent for an average of 4.2 days per year on account of illness caused by financial worries.

Recent research from PwC corroborates these findings, going on to highlight how “46% of those who are distracted by their finances at work say they spend three hours or more per week thinking about or dealing with issues related to their personal finances”.

Furthermore, the report conveys how over 50% of Millennial and Gen X employees are withdrawing retirement funds early to cover unexpected expenses, in line with data that finds that “one in six of those aged between 18 and 35 said they were unsure they would have enough money to support themselves when they stopped working”.

It is therefore quite clear the potential impact for UK employees by not engaging with financial planning tools for their employees.

What can employers do?

What can employers do to both empower individual employees to address their financial capability and resilience increase their wellbeing, and ultimately mitigate decreasing productivity levels?

Basically it comes down to a combination of assisting with increasing financial literacy in the workplace and offering benefits packages which enable employees to develop a saving mentality and the ability to compare financial products available to them.

Poor financial literacy can exacerbate economic inequality, as employees may undertake transactions that result in higher transactions and fees. Meanwhile, unclear and outdated benefit investing platforms may not only ‘scare off’ employees in the first place, but may result in detrimental buying decisions, triggering the vicious cycle of financial worries.

Ben Hollingdale is head of sales at Smarterly.

This article was provided by Smarterly.