Why now is the time to rethink financial wellbeing for all
The UK’s cost-of-living crisis is causing greater focus on financial wellbeing in the workplace. While most employers are clear that responsibility for finances lies with individual employees and not the employer, healthy or poor financial wellbeing across a workforce can affect an organisation’s success and sustainability.
Rising inflation, increased energy bills and rising mortgage rates are not the only reasons why employers should take a closer look at financial wellbeing. Changing workforce demographics, longer working lives and increasing diversity; transformations in products and services, leading to changing skills needs; and the increasing number of careers employees have over their lives are the bigger, longer-term drivers for rethinking the objectives of a business-aligned financial wellbeing strategy.
Our inaugural Financial Wellbeing Research 2022, together with WEALTH at work, outlines how to navigate workplace financial resilience for a sustainable future.
Shifting responsibility
Currently, the workplace pension is the vastly dominant element of financial wellbeing (coming second only to pay), which can be out of kilter for both employer and employee needs in 2022. Few would argue that saving for a pension is hugely important, but it needs to integrate more fully into overall financial wellbeing. Not least because pensions themselves have changed significantly over decades, moving responsibility for retirement saving outcomes away from the sponsoring employer. Today’s employers expect employees to take on the responsibility for saving enough for retirement. It is unclear whether all employees have fully grasped this shift.
This research shows that most employers hope to use financial wellbeing products and services to meet HR objectives, such as improving overall employee wellbeing (93.6%), retaining employees (81.4%) and increasing employee engagement (80.7%).
A very small proportion hope to align with the bigger business and societal changes mentioned above. Fewer than one in five (18.2%) aim to manage an ageing workforce, with just one in 10 (10.6%) aiming to retain workers over age 55. Only one in seven (13.6%) link their actions to workforce planning or board-level objectives or purpose.
That said, REBA believes that it is increasing alignment with these business objectives that will lead to change over the coming years.
Financial wellbeing will move up the reward and benefits agenda as employers increasingly focus on the long-term sustainability of workforces, from diversity, skills development, gradual falls in population growth and the number of people coming into the labour market through to shifting career behaviours and longer working lives.
Lack of data analysis
But, first, the lack of data analysis needs to be addressed. This research shows that few employers check for pay or bonus gaps by ethnicity, age, disability, sexuality or socio-economic class, nor by whether an employee is a parent or carer (both roles that can affect careers, earnings and increase inequality).
While there is growing awareness of the pensions savings gap, just one in five employers check for this by gender and barely at all for other characteristics. While this research did not ask about risk and health insurances (a vital financial wellbeing safety net for many employees), REBA is aware of forward-thinking employers taking a close look at levels of cover linked to pay grades and what this means for equity by gender, ethnicity and so on.
Given the risks to employers – from lost productivity and increased absence resulting from financial stress, through to the longer-term impact on HR and business objectives mentioned above – it is not surprising that seven in 10 (70%) of respondents said that increasing financial capability is a priority in the next two years.
One of the biggest immediate shifts thrown up by this research is the coming rise of financial education in the workplace. It is currently offered by four in 10 (39%), but this is set to rise to more than seven in 10 (72.5%).
While this may take longer to implement than many employers hope, it does demonstrate the direction of travel as both employees and their employers focus more on financial wellbeing.
