Why workplace benefits and savings are an essential offering

With many employee continuing to feel the effect of high inflation, helping them to build their financial resilience is vital

Workplace benefits and savings are more essential than ever as the number of employers offering pay rises, in line or above inflation, is set to fall.

The Financial Wellbeing Research 2023 report, from the Reward & Employee Benefits Association in association with WEALTH at work, reveals that only 19% of employers plan to increase pay in line with, or above inflation in the next two years, compared with 42% of employers that did so in the last two years.

This comes as research from WEALTH at work reveals that many full-time workers admit that money worries are affecting their work, with 23% struggling to concentrate and 15% saying their productivity has fallen. In addition, 16% have incurred debts for the first time in their professional lives this year (excluding mortgage debt).

This is possibly why the proportion of employers offering access to wage advance schemes has grown, with 37% of employers now offering such schemes, up from 23% in 2022.

However, while employers are less likely to offer above-inflation pay rises, they may instead be looking at financial wellbeing benefits to play a greater role in supporting employees through cost-of-living challenges, with 50% of employers set to increase financial wellbeing spending.

In particular, the research found that support in the workplace is growing for saving products which can help build financial resilience.

Employers offer or plan to offer in the next two years:

Pay-as-you-earn saving schemes such as help-to-save and opt-in payroll savings (34%),
Employee share plans (42%),
Tax free saving wrappers including ISAs (45%),
Long-term incentive plans (54%).

Additionally, schemes to help employees cut costs that are set to remain in place include salary sacrifice plans (94%), and product discounts and/or voluntary benefits (92%).

Alongside this, the number of employers offering independent financial education, guidance, and advice is set to almost double. Employers offer or plan to offer in the next two years:

Financial education from an independent provider (62%),
Financial guidance (67%),
Advice on general finances (56%),
Advice specific to retirement (60%).

In fact, financial coaching is also set for significant growth – 12% of employers currently offer it but 41% plan to within the next couple of years – a 241% increase.

Jonathan Watts-Lay, Director, WEALTH at work says: “With many households likely to feel the effects of stretched budgets well into the year ahead, supporting employees to manage their money and make it go further has never been more important.

“For many companies, inflation-busting pay rises will be a challenge. However, there are more ways employers can help, which is why workplace benefits and savings have become an essential workplace offering.”

He adds: “It’s encouraging to see that employers are increasing employee access to a range of financial wellbeing products and services, with many more planning to do so.

“However, it’s worrying that wage advance schemes are increasing in popularity as they are not a long-term solution to financial problems, and employers must ensure that they are offered alongside financial education and guidance.”

Watts-Lay says the the potential benefits of any workplace financial support are determined by whether employees are aware of the products and services on offer to them, and how to access them and optimise their use. Also, in the current environment, it has become difficult for many people to save as much as they would like, which can have a serious impact on financial resilience.

He added: “This is why it’s so important to underpin any financial wellbeing initiative with financial education and guidance, as this can not only help employees understand the financial benefits on offer, but also how they can better manage their finances and save for the future.”

To help employees build financial resilience, WEALTH at work recently launched a Corporate ISA, which is specifically designed for the workplace. It enables employees to save in a convenient, flexible and tax-efficient way from payroll as well as making ad hoc payments.