How to help employees build a financially resilient future

As the price of everyday essentials continues to increase, the financial resilience of many is being tested

About 7.8 million people in the UK are struggling to keep up with their bills, according to the Financial Conduct Authority, an increase of about 2.5 million people since 2020.

Almost one in two people feel overwhelmed and uncertain about the future, with 58% of the under-34s taking time off due to financial worries. With this potentially costing UK employers £2.5bn a year, it’s important to find a solution to address the financial instability felt by many.

Employers can play a pivotal role in fostering financial resilience in their workforce, which will ultimately benefit them in the long term. A financial wellbeing policy in the workplace can help improve workers’ physical and mental health, reduce their stress levels, increase productivity and reduce sick days.

And, with 65% of people looking for a good financial wellbeing policy when considering their next employer, having a good wellbeing policy will make you stand out in the job market.

Think holistically

Financial wellbeing is still the least common area included in HR wellbeing strategies, even though it has been increasingly in the spotlight in recent years. So it would be easy to say ‘focus on financial wellbeing’. But what would be more useful is to think about more holistic topics that could be explored with employees, to provide well-rounded support in the short, medium and long term.

Financial education has only been mandatory in schools since 2014, so it’s likely that some employees have never had formal guidance, even on the basics. It’s important to start with short-term strategies to develop good money habits. Offering employees guidance on creating – and sticking to – a budget is the first step to becoming more financially resilient.

Factoring-in saving for an emergency fund can help protect against income shocks like job losses, or spending shocks like boiler repairs. Being organised with the money coming in each month builds a good foundation for employees to start feeling more financially confident.

It’s then good to think about medium-term stability. Debt management tools can be useful in supporting employees to feel in control of any debts, as well as highlighting what to look out for when borrowing is the only option.

Bridging the savings gap

With 51% of people in the UK unable to live on savings for more than a month, encouraging the use of savings accounts will help to bridge the gap between immediate spending and saving for retirement.

Payroll savings vehicles are being used more often by employers. There several workplace saving schemes on the market, but some commonly offered are: ISAs, Save As You Earn, or Share Incentive Plans. With savings coming straight into your employees’ nominated accounts via payroll, this option can make it easier for them to save what they need.

Clare Stinton, Workplace Financial Wellbeing Analyst at Hargreaves Lansdown, says: “Payroll savings make it easier for people to pay themselves first. Automation removes both the conscious decision and manual effort needed each paycheque. The ‘set it and forget it’ approach means people are more likely to form habits, which will provide a boost to their savings and in turn, financial resilience."

Education on investments will also be beneficial. Once people have saved enough cash for a rainy day, investing can provide an opportunity to grow their wealth long-term.

Building for the future

Of course, investments can go up and down in value, so people could get back less than they invest. But in understanding their risk appetite and making informed decisions, employees have – with the power of compounding – the potential to build on their savings, improving their confidence and resilience.

Because you can't normally access your pension until you're 55 (57 from 2028), it's easy to think a pension is something that can wait. However, according to Hargreaves Lansdown research, less than 40% of people are on track for a moderate retirement in line with the Pension and Lifetime Savings Association’s target of £23,300 a year for a single person outside London. So planning ahead is vital for employees to be financially resilient in the long term.

Providing informative sessions on topics such as how pensions work, the benefits of increasing contributions and pension tax allowances will encourage employees to think more actively about life after retirement.

The reality is that people have little confidence when it comes to knowing how much they might need in later life. In a recent survey*, Hargreaves Lansdown found that only 12% of people strongly agreed they had a clear idea of how much income they’ll need.

Financial wellbeing isn’t a quick fix, but, through your ongoing support, you can build a more financially confident, content and resilient workforce, ultimately benefitting you as an employer.

This article is not personal advice. If you are unsure of a course of action, please ask about advice.

*(Opinium Survey May 2023, 1563 respondents)