Why employers must collect data on financial wellbeing
We know that gathering data on the experiences of the workforce is crucial for a strong employer proposition and effective reward and benefits strategy. Financial wellbeing is no different. Understanding how employees’ personal finances are affecting the general wellbeing of the workforce is essential to identify gaps in benefits provision and to gauge employees’ financial literacy levels.
Employers know this. Two thirds (66%) of respondents to the REBA research say the biggest challenge they face for improving the financial wellbeing of most of their workforce is not having the data to understand employees’ financial challenges. In turn, this affects their ability to offer personalised benefits, with 41% citing this as a key challenge in improving financial wellbeing.
Yet more than a third (35%) don’t measure any aspect of financial wellbeing at all. And those that do, gather metrics mostly based on proxy measures. For example, 40% collect participation rates in financial wellbeing programmes. The same proportion (38%) compile data from their financial wellbeing benefit products and services providers, and measure levels of employee engagement. Less than a third (31%) ask questions related to financial wellbeing initiatives on their staff surveys.
These generic metrics that dominate financial wellbeing mean that more specific data, such as employee absences linked to financial concerns (7%), are barely measured, which may relate to absence processes that do not consider finance-related absence. In addition, only 11% of respondents measure company-specific workforce demographics, and a tiny 3% collect information on the cost of early retirement.
No data? No problem
In the absence of data about their own workforce, there are third-party data sources, such as the Office for National Statistics, which offers hugely valuable data related to earnings and age group, for example. Only 5% of our respondents reported using third-party data, but this can be an excellent starting point for creating a financial wellbeing strategy.
An employer with an advanced financial wellbeing strategy explains: “Asking employees for their views can be slow and people sometimes feel over- researched in our company. We used third-party data as a proxy instead when getting started. Then, after we had launched our strategy, we fine-tuned the approach using data from our provider.”
Businesses must use financial wellbeing metrics to support workforce planning. For example, just 19% analyse pensions gaps by gender in their workforce – but there is widespread evidence of significant shortfalls in women’s pensions compared with men’s. Even few employers gather data on the pension savings gap by other characteristics. Fifteen per cent measure information based on age, the same proportion (6%) collect data on ethnicity/race and disability, and 3% check gaps for employees who are parents and carers.
Delving into these areas would enable employers to analyse potential trends that have repercussions for the future of the business as well as for individuals, such as employees’ ability to retire and absence levels. Data gathering on financial wellbeing also helps define return on investment in benefits and justify future activity. Ultimately, it improves the employee experience.
Top tips on collecting financial wellbeing data
1. Work with your benefits providers who can often gather data easily. Employees might be happier talking to third parties. Providers may have diagnostic tools to assess gaps in employees’ knowledge.
2. Carry out focus groups and surveys, communicating what the findings will be used for and how they can reshape the benefits package. Make sure employees understand what you are asking them, by clarifying what financial wellbeing benefits they have got and how to use them.
3. Review your own HR data. Workforce demographics, job characteristics and salaries, pension plans and changes in circumstances – such as maternity leave – can help highlight potential sources of financial difficulties.
4. Use third party data sources – see box out.