08 Mar 2022

How are financial and mental resilience connected? And how can employers support stability in both?

If you’re in any doubt that financial worries have a negative impact on mental health and ultimately performance at work, just look at these stats from our own research, the Financial Advice Working Group for the Treasury and the FCA:

70% of employees say that financial worries negatively affect their mental health
60% of employees say that financial worries negatively affect their performance at work
70% of the workforce spend a fifth of their working day worrying about money
4% of payroll per year is what financial stress costs the average UK company

The fact is it’s impossible to expect employees to leave their worries at home; we bring our whole selves to the office and that includes the good and the bad. And so logically if we want our people to perform at their best, we need to help them become more financially resilient which ultimately helps build up their mental resilience.

From April, we see increases in national insurance contributions for both the employer and the employee – for an employee earning £20,000 a year, that means £89 less in disposable income for them and £100 extra cost for the employer every year. On top of this, we have the general increase in the cost of living which is being sent through the roof by higher energy prices in particular. Employees are going to start feeling the pinch, but the solution is not about giving salary increases.

When we feel under pressure financially, our natural reaction as employees is to negotiate a pay increase or look for a new job with higher pay, but that’s not the answer long-term. When inflation is high, salary increases just make it worse. Higher salaries ultimately mean an increase in the cost of goods and services which only puts more pressure on inflation. It’s a blunt tool with short lived benefits. What employers really need to focus on is increasing employees’ disposable income – making their salary go further. At the end of the day, it’s what ends up in my bank account each month that really matters not the figure on my payslip.

And there are some simple things that employers can do to really make a difference:

Salary exchange (also known as salary sacrifice)

Despite a general cull by the Treasury a few years ago, this is still a real “no brainer” for pension contributions and it still surprises me how many employers don’t take advantage of this real gift from the government. If you don’t do it, you’re looking the proverbial gift horse in the mouth.

For someone earning £20,000 this could mean an extra £133 disposable income when the increased national insurance rates come into force in April. Its free money being left on the table. And then for the employer, there’s a potential saving of over £150 which could either be kept or paid into accessible savings to give employees a helping hand in becoming more financially resilient.

Employee discount schemes

There are a myriad of providers out there that offer schemes where employees can enjoy discounts on everyday spending. Some are free to implement.

Financial education

As pressure rises on everyday costs, employees need help with getting the basics right. Budgeting tools, price comparison sites, managing debt etc. These are all things that can really help in terms of making disposable income go further.

Whilst it’s impossible to negate the full effect of price increases, there are little things that employers can do to ease the worry for employees and ultimately help keep them happier and more productive.

This article was provided by Cushion