The new imperatives for financial security amongst employees
Our new research of financial health in 12 countries worldwide found 60% of employees in the UK are stressed by their financial situation – 18% of them seriously so – placing Britain above the global average.
Respondents to our survey identified three top causes of financial stress: 36% blame general economic conditions, 35% say personal health while the same number attributed worries to not saving enough for retirement.
Women are more financially stressed than men, most notably when it came to saving enough for retirement, largely because of a 40% pensions gap. 40% of women identified this as a cause of stress compared to 30% of men.
Is it time to retire retirement?
Increases in life expectancy helps explain the relevance of poor health and inadequate retirement savings as contributors to financial stress. Traditional models of studying, working and then retiring look increasingly outdated as people live longer and take greater responsibility for saving for long-term saving.
Almost two-thirds of respondents to the survey say they expect to keep working when they retire, with 7% believing they will never give up work. More than two-fifths (44%) say they will keep working in retirement but at a slower pace.
Clearly then the employee’s health is crucial to their ability to use work – either full or part time – as a means of funding retirement.
Yet while people accept personal responsibility, the survey revealed a relatively low number of people have taken control of their financial savings. Just over half (56%) had invested in a retirement scheme of some sort, while 45% say they have not calculated how much they need in retirement. Nearly nine out of ten (87%) have not consulted with a financial adviser.
Financial stress and the individual’s inability to take control of the situation presents both challenges and opportunities for employers.
In the employer’s interest
It is therefore in the employers’ interests to work with employees to reduce financial stress. Employers responding to the survey identified several business benefits from improving an employee’s financial security.
58% acknowledged that employees would be less stressed over financial matters at work which relates to the 46% that expected an improvement in productivity.
Irrespective of the benefits on offer, it is important to consider how those arrangements will be communicated to ensure employees are fully engaged with the programme and value the benefits offered.
Improvements in technology — and data analysis — have made it easier to personalise communications, making sure they attract the attention of the individual instead of getting lost in a sea of messages.
Not only is it possible to address employees by name, communications can contain individual information to make them as relevant as possible and be delivered at a time that increases the chances of the employee taking action.
57% of businesses said employees would have a higher level of trust in the employer while 52% expected greater levels of job satisfaction.
The employer expectations from improving the workforce’s financial security aligned with employees’ views.
More than four-fifths (82%) of respondents say that improved benefits or added access to a pension would have a positive impact. More than a third (36%) say they would be more satisfied in their job; 29% more committed to the organisation; and 28% would spend less time worrying about money at work.
The employer is also uniquely placed to make a very real difference to their employees’ finances. More than eight out of 10 employees (82%) say they trust their employer to provide financial advice which compares to less than half (49%) of individuals who trust a financial adviser.
At the same time the employer may be able to use economies of scale to secure better rates on financial advice and financial education services, which could help to improve their employees’ financial health. They may also be able to help their employees with a short list of providers or even provide products, such as loans, to help employees manage their debt.
Improving an employee’s financial situation not only benefits their work but gives them a better chance of being able to afford to retire. This is important for businesses where the work is labour intensive, meaning employees may be less productive as they get older.
However, the idea that older employees are a burden is a thing of the past for many industries.
The employer can also benefit from tapping into the experienced workforce, encouraging employees to stay on as part of a gradual move into retirement. This presents a win/win situation for both parties with employees benefiting from an ongoing salary while the employer retains highly skilled and experienced personnel.
Summary
The traditional lifestyle model of study, work, retire is quickly becoming a thing of the past. Employees continue to face new financial challenges throughout their lives - paying off debt; short and long-term savings; paying for one-off events - and we challenge you as an employer to ask yourself, what is my obligation to support this?
Supporting employees with financial matters has benefits for both the individual and the business. Employees who are in control of their finances are less stressed and more productive. Employers that assist employees in taking control can expect greater loyalty, lower staff turnover and improved productivity.
The question then is not whether employers can afford to help their staff to take control of financial matters, but whether they can afford not to.
This article was provided by Mercer.
Supplied by REBA Associate Member, Mercer
At Mercer, we believe in building brighter futures.
