Financial wellbeing has been an emerging buzzword for several years in the corporate space. As mental health and emotional wellbeing have moved up the corporate agenda, so too are businesses recognising the significant role financial wellness plays within general wellbeing.
The past year has shone a light on the financial issues many employees are facing. If there was growing awareness around money-related struggles faced by the workforce prior to the pandemic, there is now a definite understanding.
In the past, there has often been a disconnect when it comes to awareness of financial wellbeing; on the one hand, we talk about ISA millionaires and people in their 50s taking advantage of pension freedoms to buy sports cars, yet on the other hand, we have more people than ever having to rely on foodbanks.
According to the Money and Pensions Service (MAPS), 11.5 million people have less than £100 in savings to rely on, 22million cannot plan their retirement due to lack of understanding and awareness and 5.3 million children do not receive a ‘meaningful’ financial education.
The pandemic has heightened people’s inability to manage short-term financial pressures
COVID-19 and the financial impact
The pandemic has undoubtedly exacerbated these issues. New figures released last November by the Trussell Trust revealed that reliance on foodbanks increased by 61 per cent during Winter 2020 in comparison to the previous year, while nearly 100,000 households used foodbanks for the first time between April and June 2020.
There are numerous statistics which have highlighted the little money families have to rely on in case of an emergency. During the pandemic, there was growing awareness of families who could not afford laptops, so their children were unable to access home schooling. It became a classic example of financial stress. Between that, unprecedented job losses and people put on furlough, the pandemic heightened peoples’ inability to manage short-term financial pressures.
It’s a common misconception among employers that if an individual is in employment, they will be relatively financially healthy – but this is not always the case. It may be, for instance, that their spouse or partner has just lost a job or put on furlough or they’ve had to reduce their hours due to home schooling. Debt too, can be a massive issue but one that is rarely talked about.
The Money Advice Service estimate that one in five UK adults are ‘drowning’ in debt while ONS figures released last year revealed that 2.6million people were experiencing worry and anxiety about household bills.
Financial wellbeing is the employers’ responsibility
Employers then, can and do have a vital role to play in supporting the financial wellbeing of their workforce; 61% of respondents to the Aon 2021 Benefits & Trends survey either agreed or strongly agreed that the employer is responsible for influencing employee financial wellbeing.
Financial wellbeing should feed into the workplace resilience piece; if employees are not worried about health or finances, they’re probably going to work better, and be more productive and efficient. Financially stressed employees can be distracted, disengaged employees. They may spend significant portions of their day worrying about money, they may need to have private phone calls away from their desk to speak to the bank about overdrafts. They may be unable to focus.
Clearly, that’s not ideal from a productivity perspective, but it’s more than that: employers know they need to look after their people because it’s morally the right thing to do.
Getting started – The Four Ps Framework
While most employers will already have some financial wellbeing benefits in place already such as staff retail discounts, or critical illness plans, the Four Ps framework to help focus on key employee areas to make a positive impact:
- Prepare: build financial knowledge across the workforce (e.g. budgeting advice, ‘Lunch & Learn’ sessions, financial education seminars etc)
- Plan: build a short, medium and long-term financial plan (e.g. retirement planning, health savings, financial guidance etc)
- Protect: Prepare for the unexpected (e.g. benefit provision from loss of income, critical illness etc)
- Preserve: Understand the financial needs of the workforce to help preserve savings and investments if applicable (e.g. having an up to date Will, , understanding one’s finances holistically, wealth management, pension funds etc).
Ultimately, a good financial wellbeing strategy is about helping individuals to understand what outcome they’re wanting and reminding staff what existing financial benefits are already on offer.
Effective communication is key, but it often falls flat. Employers need to reengineer conversations so it’s outcome-focused rather than just the product or benefit itself.
Think about a vacuum cleaner; if a salesperson tries to sell products by just asking people if they want a new vacuum cleaner then they’re likely to be unsuccessful. But if that salesperson were to say, ‘do you want to revolutionise how you clean your house? Do you have pets who leave fur all over the place? This product will give you a cleaner house!’ In the same way, employers should be finding out what it is their employees are struggling with and presenting them with benefits which can help.
Pulse surveys and questionnaires can help employers ascertain and pinpoint specific worries and concerns their workforce are having. Results from these can be great starting points and enable employers to prioritise those issues. Benefit provision which solves those concerns will therefore have the biggest impact and offer the greatest return on investment
But, financial wellbeing is not just about having more money: Financial wellbeing is having the confidence to make the right financial decisions and to plan for the future. It’s the ability to confidently manage financial life today, while preparing for the future and anything unexpected along the way. That’s the key message employers need to get across to their workforce.
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