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24 Oct 2018
by Jonathan Watts-Lay

How to develop a financially empowered workforce

Nearly half of all UK adults rate their own knowledge about financial matters as low and 24 per cent have little or no confidence in managing their money, according to Understanding the financial lives of UK adults (2017).


The impact of this is clearly being felt in the workplace, with research finding that employers believe that financial worries cause increased levels of stress and absenteeism among employees, and that it leads to lower productivity – Wellbeing in the workplace (2018).

Getting the basics right

A big part of the solution is helping employees become more familiar with the basics of money management. Getting them to think about how they spend money on everyday items such as utility bills and insurance is essential.

A great example of this is car insurance. It is extremely unlikely that you will get a better quote by remaining with your current provider rather than shopping around, but many neglect to do this. Although some employees are becoming more aware of the advantages of researching different providers, employers could still be doing more to inform and support their staff with basic money management.

Another important principle is helping employees understand the difference between good debt and bad debt. For example, a mortgage is a form of good debt – it makes sense to have a loan in order to own your home as it is a stable, easy to manage approach to long-term borrowing. However, it should still be reviewed occasionally to ensure it is a good deal. At the opposite end of the spectrum, debt with high interest payments such as payday loans and credit cards can get out of control if they are not repaid quickly. The cost of paying the interest may force someone into even greater financial difficulty.

The value of employee benefits

It’s also important to look at the employee benefits platform itself. A good starting point is to investigate if employees are taking up and using the benefits on offer. And if not, why? Is it because the benefits aren’t appropriate to the workforce, or are employees unable to understand either the way the benefit operates, or how it could help them?

Making sure benefits are relevant and well-explained can really help take-up and improve personal money management. For example, many employers offer discounts at various retailers through their voluntary benefits programme, yet take-up is often low. Everybody has to do the weekly shop, so a five per cent saving on this for example, could then be used to help reduce debt or be put towards another workplace benefit such as a pension.

One of the most crucial elements of employee financial wellbeing is retirement preparation. Our research found that a staggering 80 per cent of employers believe their employees are not saving enough for retirement – focus on retirement income matters survey (2018). This may in part be because of affordability, which is why money management is so important, but it may also be that employees do not understand the upside, such as employer-matched pension contributions and tax relief.

Money management is the key

The answer to all this lies in providing employees with support around how best to manage their money, and the most successful way to do this is through the provision of financial education, guidance or regulated advice. This approach can make sure that the savings effort really pays off and in turn, leads to a confident and financially empowered workforce.

The author is Jonathan Watts-Lay, director at WEALTH at work.

This article was provided by WEALTH at work.

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