Employee financial resilience – the importance of definition

Resilience is one of those words where the definition leaves you with at least one more question to answer.

If resilience is “the capacity to withstand or to recover quickly from difficulties,” what difficulties are we talking about exactly?

Employers trying to build financial resilience across their workforce need to define resilience in the context of both the difficulties employees face and the solutions that can manage these risks.

In my experience, there are four key pillars to consider; four core ideas where there is a desired end state, specific areas to focus on, data to measure and options for how the business seeks to fix the problem.

1. The objective economic perspective

This is where many employers start and end their approach to resilience; essentially asking, are my colleagues able to withstand financial shocks such as a sudden income loss, unexpected expenses, health emergencies, loss of life – and we shouldn’t forget rising living costs?

Getting any data on whether employees have the necessary emergency savings, adequate insurance, stability of income, manageable debt and access to affordable credit is often ignored or based on external research, but this should ideally be about surveying the workforce.

Solutions will come in the form of employee benefits, savings tools from salary, discount platforms, direct or third-party credit access, and not just pay rises.

2. The subjective psychological perspective

Employers should also ask about the behaviour and mindset of employees. How are people feeling?

Personality type, neurodiversity, heuristics, beliefs, financial literacy - we’re all different - but what is the business doing to help employees challenge themselves and establish whether what someone thinks and feels mirrors reality?

Objectives should focus on building knowledge, confidence and positive habits, whilst removing stress and anxiety, reducing shame and helping employees feel in control.

Solutions inevitably include financial wellbeing workshops and clinics across a range of topics, access to online learning platforms, budgeting or open banking apps provided as a benefit and pension modelling tools.

Stress reduction support may come from employee assistance programmes (EAPs), mental health or money first-aiders and access to counselling for financial anxiety.

3. The institutional or cultural perspective

Having recognised that whilst someone can objectively be in good shape, they may not feel that way, the opposite is also true. I’ve often told the story of an employee who thought they had a £20,000 per annum pension but in fact had a pot of £20,000 to fund the whole of their retirement. Would your institution allow this position to happen? Would an employee be able to clearly identify that the business they work for takes their financial health seriously?

Does the culture seek to normalise conversations about money? In addition to benefits, are there policies and strategies specifically about this topic? Is there line manager training on how to spot financial stress? Are internal campaigns visible that reduce stigma around money worries, and are peer support groups or “money champions” in place and well known?

I would also include the level of governance employed by a business across the solutions I’ve mentioned as institutionally critical.

4. The capability perspective

This is a little left field, drawn from Amartya Sen’s capability approach, defining development in terms of a person's real freedom to achieve the kind of life they have reason to value.

Really, it is higher level thinking than is normally applied to financial resilience - challenging a business to think about what it is actually providing employees with from a financial viewpoint: autonomy, dignity, life satisfaction and stability.

I have included this because I see too many People Surveys where questions focus on how the employee feels the business is doing in meeting what the business wants to achieve; not how the employee feels about what they want to achieve as an individual and the extent to which the business is helping.

Look at your latest survey – do you ask enough questions in terms of ‘capability’ and then test whether the employee feels the business is helping them to get where they want to be?

As a concluding point, across all these perspectives, there is a need to choose the right partner to work with.

Take a look at my previous article on this topic. Variables such as the accompanying commercial model, use of technology where appropriate, the quality of the support and the extent to which the solution will be trusted by employees should all be part of the procurement process.