18 Mar 2020

Three ways that employers are using nudge techniques to improve financial wellbeing

Taking a more strategic approach to the way employees interact with their work environment can go a heck of a long way to keeping them both happy and engaged.

Luckily, this approach doesn’t have to be hugely complex or daunting to implement – it’s often the case that small acts can make a big difference. This is where the nattily named ‘Nudge Theory’ can take centre stage.

In order to reach their organisational goals, companies are incorporating behavioural economic principles from this theory when designing their employee engagement programmes. This is especially good when helping improve the financial wellbeing of a workforce – but how exactly?

A little nudge knowhow

The nudge theory, coined by authors Richard Thaler and Cass Sunstein in Nudge: Improving Decisions About Health, Wealth and Happiness is about creating an environment that makes the right decisions easy to make.

For example, take the humble seatbelt in your car. We’ve all been taught, through road safety campaigns or lectures from our parents, that buckling up keeps us safe – yet, there are some who choose not to or simply forget from time to time.

That blinking light on the car’s dashboard or warning chime however is a perfect example of a subtle reminder that pushes us towards safer behaviour. A small, but highly effective example of a behavioural nudge!

Whilst these types of nudges have existed for quite some time, the nudge theory is now being operationalised and purposefully implemented in the modern workplace. In fact, nudges are now a widely-accepted tactic employed to reduce absenteeism, boost productivity, prioritise wellness, communicate more effectively and encourage health and wellbeing in the workplace.

For organisations that are looking to improve the wellbeing of their workforce, using nudges is a great place to start, and are particularly effective for encouraging healthy financial wellbeing. Here’s how…

1. Offering auto-enrolment pensions

Financial stress can be a key factor in mental health problems, so showing you’re the kind of employer that cares is hugely beneficial when it comes to supporting engagement and positive mental health.

Pensions auto-enrolment is one simple way to do this. Pensions are one of those things which aren’t really front and centre of people’s thoughts, but are something we should all be considering to ensure a financially-secure retirement. Auto-enrolment pensions make your employee’s financial security a priority, and make the process of saving for the future easy.

Your employees can of course choose to opt out if they wish; but this approach at least raises the issue and can highlight the need for future financial planning.

2. Use regular communications

A key part of ensuring positive financial wellbeing is to get the subject out in the open. The more people are encouraged to talk about their issues in a safe and confidential environment, the more likely it is that a problem can be identified before it becomes critical.

Having regular communications – be it emails, desk drops or even printed materials – that encourage people to seek help if they have financial issues, is an incredibly simple nudge that can make a real a difference. Going further, offering safe spaces where employees can discuss their financial problems may give them a lifeline they desperately need and steer them onto a more stable financial footing.

3. Aim to educate

Finally, There are plenty of professional financial bodies out there that can offer free and impartial financial advice – it might be the case that employees simply don’t know where to find them. Even just pointing people in the direction of good financial advice can be a crucial nudge to helping them deal with debt and make sound financial decisions.

This article is provided by Sodexo.