How taking an ‘altruistic capital’ approach to employee financial wellbeing can pay dividends
The world of work is undergoing an accelerated and intensified period of turmoil and upheaval, aggravated by the Covid-19 pandemic. A seismic shift is taking place in the structure of the economy, in working habits and career expectations. Employers and individuals are doing their best to adapt to this disruption.
It is in precisely these difficult circumstances that the principles of altruistic capital – the idea that delivering for employees is integral to maximising shareholder and stakeholder value – are gaining widespread traction.
This period of stress has clearly had a major impact on the financial wellbeing of the workforce. Almost half of UK workers believe their current pension provision will not be enough to provide them with a comfortable retirement, with almost the same number (45%) believing financial worries cause them to feel anxious. This trend has culminated in what has been dubbed ‘the Great Resignation.’
Escalating war for talent
For employers, the effects have been two-fold: first, it has caused an escalation in the so-called war for talent, first identified in a paper by consultancy firm McKinsey in 1997, but now entering a particularly acute phase. As of December 2021, live vacancies in the UK had reached a record-breaking 1.25 million, an astonishing 35% higher than pre-pandemic levels.
Secondly, the impaired financial wellbeing of their workforces is undermining competitiveness through a toxic combination of absenteeism and presenteeism, the latter defined as declining engagement and productivity as a result of financial anxiety.
Together, the current record labour shortages and growing employee alienation are having serious adverse effects on performance, productivity, and profitability.
Treating employees as people
Employers who harness altruistic capital in the workplace understand that their staff are best incentivised by engaging with their prime motivators: their emotions. The winners will be those who treat their workforces as real people rather than units of production or anonymised human resources.
Despite the enormous transformation in workplace culture over the last two years, many employee benefit packages have so far failed, perhaps understandably, to keep pace. Designed to reflect a workplace that no longer exists, many are creaky legacy systems, not fit for purpose in the emerging post-pandemic economy.
Unleashing the power of the pension
Reinvigorating workplace pensions can be a key recruitment, retention, and wellbeing game changer.
It comes as no surprise that an attractive benefits package is the key differentiator in winning the contest to attract talent, given that three quarters of employees are more likely to stay with, or join, an employer that offers one.
But the same percentage considers the pension to be ‘very important’ when choosing a new employer. Wellbeing and flexible working have become more important to employees, but pensions remain the most in-demand employee benefit – the single biggest benefit spend for employers other than salary, according to Moneypenny's Benefits Survey.
It is also a decisive factor in financial wellbeing terms. With fewer than three in 10 people expecting to retire at the state pension age, according to Aon, and one in four retirees not owning their property, pension concerns are a dominant aspect of financial wellbeing.
Pensions are also undergoing a period of transformation that parallels and complements the changes in working culture.
Renewed focus on value for money
Just as the fierce competition for talent is the dominant theme for businesses, so a renewed focus on value for money and member outcomes is the current undisputed megatrend in the workplace pensions sector. It is a trend that has momentum and is leading to a dramatic increase in scheme consolidation, particularly into genuinely member-centric Master Trusts; 57% of workplace pensions professionals expect the second quarter of this year, 2022, to be the biggest period for DC transfers as migration accelerates in response to regulatory pressures to demonstrate value for money (for members), according to Corporate Adviser Intelligence’s Workplace Savings Report.
If employees believe their pension is competitive, well run and provides the options and support they need, they are likely to feel more valued, more engaged with their employers and more productive and that provides employers with a competitive edge.
In partnership with Aegon
We're one of the UK's top 3 providers of workplace pensions solutions supporting over 10,000 employer schemes.
