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28 Nov 2023
by Emily Trant

How to make financial wellbeing benefits more inclusive

Financial wellbeing should be seen through a DEI lens, not depending on gender and ethnicity

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More than one in seven UK adults are financially excluded – around 14% of UK adults, according to LexusNexus. Yet in sectors which employ large numbers of frontline workers, such as retail and hospitality, recent research by Wagestream found this figure may be more than twice as high.

Financial inclusion means individuals have access to affordable financial products and services that meet their needs. This is particularly important for individuals whose financial resilience is low, because of, for example, low or unpredictable income, lack of savings or both.

Wagestream’s latest report, Essential and Excluded, explored financial exclusion, including what it means to be excluded, and how this differs based on gender and ethnicity. It surveyed 11,000 workers – most of whom work in hospitality and leisure, retail, healthcare and support services – to highlight the gaps in financial wellbeing for women and ethnic minorities. Both groups are more subject to volatile working hours, are more likely to be financially excluded, and more likely to use subprime credit products.

In these circumstances, access to useful and affordable financial services and products can be a lifeline to help individuals maintain smooth spending and essential consumption through peaks and troughs in income.

Understanding the challenge

Employers have a role to play, as income providers, and are beginning to realise this is not a niche issue. Financial exclusion is often a hidden or unknown facet of inequality that can impact the overall employee experience of work and pay – but there are opportunities for organisations to alleviate or even eliminate some of these challenges.

This starts with gaining a true understanding of the challenges employees face. While these challenges will differ from workforce to workforce, the research, which reflects the general demographic makeup of hourly and shift-based workers in the UK, reveals overarching findings that employers should consider as part of their diversity, equity and inclusion (DEI) strategy.

At the most fundamental level, variable pay creates shaky financial foundations, and ethnic minorities are more likely to experience variable hours than their white peers. These individuals are also more likely to lack adequate savings, are half as likely to receive state support compared to their white peers with similar income, and are more likely to use subprime and non-traditional credit products.

Understanding this is hugely beneficial for organisations looking to approach workplace policies and benefits through the lens of DEI. For example, with the knowledge that volatile working hours drive financial exclusion, especially among ethnic minorities, employers can make it an priority to consider the implications of their policies related to minimum contracted hours, shift notice periods and shift cancellation.

Payroll savings

Knowing that fewer than one in 10 households have adequate savings and that this challenge is more acute for ethnic minorities, helps employers see the importance of implementing a payroll savings programme.

Ideally, they should consider introducing this on an opt-out basis so employees can start saving by default. Recent research from Nest Insight shows that savings participation can reach as high as 71% of a workforce with this approach.

Ultimately, employers should focus on providing a wellbeing toolkit tailored to the needs and circumstances of their workforce. While the cost-of-living crisis has seen many organisations sharpening their focus on financial support, financial wellbeing programmes should be more than a knee-jerk reaction to high inflation. Getting them right can create routes to financial resilience, ultimately leading to longer term wellbeing.

Armed with the knowledge of the financial challenges colleagues face, organisations should ask the following questions when considering a financial wellbeing offering:

  • How does this create financial inclusion for women and individuals from ethnic minority backgrounds?
  • How does this affect individuals on variable pay?
  • What access to financial products do employees need to have to successfully use this?
  • What proportion of the workforce will be able to use this?
  • Are there any particular groups who are more or less likely to benefit from this?

Eliminating financial inequality

Whether the components under review are workplace loans, access to flexible pay, sick pay policies or insurance benefits, employers should always consider how these benefits might impact different groups of employees, and whether these policies and benefits are helping to create financial stability and financial inclusion.

Financial inequality persists in the UK, but employers have the potential to alleviate, or even eliminate some of this disparity. There is a clear business case for solving these employee challenges, with improving productivity for more than a quarter of a workforce, reducing churn and boosting recruitment all compelling business benefits. 

Tackling the inequality in workers’ experience of work, pay, savings and financial inclusion is not only the right but also the smart thing to do.

Discover Wagestream’s latest study on the financial exclusion of shift based workers here.

In partnership with Wagestream

Wagestream’s financial wellbeing platform makes work more rewarding for 3 million people.

Contact us today