Over the past few months, an increase in costs caused by supply chain issues, as well as salary increases made by organisations looking to attract and retain workers in a candidate-short market for some of their hard-to-fill roles, has led to inflation rising and prices increasing.
This is set to be exacerbated by the rise in prices caused by the war in Ukraine, plus the implementation of higher national insurance and increased energy costs starting in April.
While some may argue that a way to ease these pressures is for companies to offer pay rises to their staff, this could be unsustainable, and according to the Bank of England’s recent announcement could make the situation worse. Companies are also facing higher costs – they face higher energy costs, higher prices for goods and services, and will also be subject to the increase in national insurance.
With many organisations still feeling the pinch of the pandemic, some will be unable to introduce pay increases. However, this doesn’t preclude them from being able to support employees’ financial wellbeing and offer other benefits.
What is financial wellbeing?
The Money & Pensions Service defines financial wellbeing as the following:
It is about feeling secure and in control. It is knowing that you can pay the bills today, can deal with the unexpected, and are on track for a healthy financial future. In short: confident and empowered.
As this definition highlights, financial wellbeing is not just about having money, it’s about being in control of your finances and feeling secure, you can be earning £100k, yet still not be in control of your financial wellbeing.
Why should employers support employee financial wellbeing?
While some organisations may consider financial wellbeing a personal concern rather than a professional issue, this should not be the case. As an employer you have an ethical duty to your employees, while it also makes good business sense; staff who feel secure with their financial situation will be happier and more productive.
Research by the Centre for Economics and Business Research estimates that 4.2m working days are lost in absences each year due to a lack of financial wellbeing, while Close Brothers’ ‘Financial Wellbeing Index’ found that 77% of workers thought money troubles impacted their performance at work.
“Organisations should do everything they can to help their staff bring their best selves to work. Helping them with their financial wellbeing should form part of this,” says Karen Jackson, Human Resources Director at Reed. “Companies know that supporting physical or mental wellbeing is vital to maintaining employee performance – financial wellbeing is no different.”
A recent CIPD study found that only 11% of employers had health and wellbeing strategies, only 11% actively focused on financial wellbeing, compared with 57% actively focused on mental wellbeing. This illustrates that there is clearly a lot more businesses can do to support their workers – especially as mental wellbeing and financial wellbeing go hand in hand.
How can companies help employees with their financial wellbeing?
The CIPD lists three steps that organisations should take to start building a financial wellbeing policy:
Let your workforce know that they can get free, confidential and independent money and debt advice from the government’s Money and Pensions Service.
Make sure your workforce is fully aware of all the benefits you currently offer and how to make the most of them.
Begin a dialogue with employees and line managers about the financial challenges and opportunities faced by them and the business. This will show your concern and help to break down the stigma associated with money problems.
Beyond these steps, there are many directions employers can go in when crafting a policy. As Karen highlights, the importance of step three in the CIPD’s process is critical to getting the right things in place:
“Engaging with your employees is a must when creating your financial wellbeing strategy. This will highlight where their financial concerns are and allows you as an organisation to tailor your strategy and approach to meet their needs.
“If you find that many don’t know where to start when it comes to managing their finances, then providing access to financial education resources makes most sense. Or, if you find that employees have sound knowledge, but need a strategy or approach that can help them make their money go further, then investing in benefits which offer discounted travel to work, or money off their favourite brands, would be a better step to take.”
With the squeeze on finances looking set to last for some time, incorporating financial wellbeing into a holistic wellbeing strategy can provide both short-term and long-term benefits to you and your employees. Not only will it help maintain employee performance, but it will also demonstrate you take your duty of care seriously.
To find out more about how to create a holistic reward offering that stands out, speak to one of our consultants now.