Why poor financial wellbeing can impact organisational resilience, and what to do about it
In a report conducted by the Institute for Employment Studies (IES) on behalf of the Chartered Institute of Personnel and Development (CIPD), the analyses detailed that poor employee financial wellbeing affects employee health and productivity, in terms of poorer overall job performance; loss of concentration; short-term decision-making; and sometimes absenteeism. An organization’s ability to provide support to their employees’ wellbeing could be very much instrumental but how can companies achieve this?
Events that have derailed of employee’s financial wellbeing in recent times include:
- Covid and its impact on employee wellbeing: One issue that cannot be overlooked is the pandemic as it forced people to take a hard look at their wellbeing. Covid not only impacts people’s health, it also affected their financial wellbeing. Research carried out by the United Nations development program in Malaysia found the pandemic reduced income by 50% putting many households below the poverty line.
- Inflation: One of the issues affecting employees’ financial wellbeing is worsening economic indicators such as inflation. In the Netherlands for example, inflation is at its highest currently at its highest since 1982, and has been steadily rising since the summer of 2021. The UK is not insulated from rising inflation, as data from the Office of National Statistics (ONS) suggests that the annual inflation rate in the UK was relatively higher at 5.5% in January of 2022, the highest reading since March 1992, compared to 5.4% in December. Though the pandemic could be sited as one of the reasons for hike in prices, it has been highlighted the rising cost of food and energy has been driving up inflation rate. This has a significant impact on the quality of life of employees and reduces their financial wellbeing.
How can employers provide support?
To help an organization be resilient, it is important that employee wellbeing is at the forefront of corporate strategy. As we included earlier, there is a clear linkage between productivity and employee financial wellbeing so companies do need to provide support it. When employees feel that their needs are integral to a company, it creates a healthy workplace where they can reach their full potential which clearly translates into greater output for the company. Employers can support in several ways. One of such is understanding what their employees expect from them. For the millennials and Gen Z, providing an environment where they feel they are valued could do the trick.
Another effective way is by providing educational support in the areas of financial wellness. Companies need to create an effective channel to access financial education so employees can better manage their finances and understand financial resilience on their own so they can be better prepared for the unforeseeable future.
The Chartered Insitute of Personnel Development (CIPD) in its research makes some very interesting actionable call items for organizations in supporting their employees; In summary, it calls for organizations to ensure that that their organizations to ensure that their workforce are fully aware of all the benefits that they have and how they can make most of them. There is also the need to have a dialogue with workforce and line managers about their financial challenges and how best to address it as well addressing the stigma associated with money problems.
In conclusion, companies also need to ensure that they are also resilient in providing these supports for their employees. Some of these perks may not come cheap and that could mean an increase in their operational expenses. The practical actionable item here is to ensure the sustainability of these measures that they have or will put in place.
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