If there has ever been a time for ensuring employee financial resilience, it is now. The COVID-19 pandemic has forced millions of employees to adjust their personal finances, with many feeling increasingly worried and anxious about what their financial future holds.
There can be significant implications from financial stress on engagement at work and overall wellbeing and this is an issue staff shouldn’t face alone; employers have an opportunity to help provide the support required to help improve financial wellbeing and resilience.
What has made the impact of the pandemic heavier on employees’ personal finances was that many only had minimal short and long-term savings to fall back on. According to Unbiased, 17 per cent of people in the UK aged 55 and over, have no pension savings other than the State Pension. When all ages are considered this figure rises to just over one in five (21 per cent).
Why were savings so low?
A lot of us have a behavioural bias favouring the short term over the long term, so saving isn’t always a natural instinct. Low interest rates haven’t helped this as saving isn’t rewarded, while borrowing to have even more in the short term has been easy and cheap.
But the pandemic has put paid to the idea that finances can be planned at a later date, ONS data shows the percentage of household income that was saved shot up from 7.7 per cent at the end of 2019 to 27.4 per cent in Q2 2020, although this is already falling quickly back towards the long term averages. Bank of England data also shows that billions of pounds worth of credit card balances and loans have been repaid in 2020 after years of steadily increasing balances.
But incomes have fallen for many households due to lower wages as a result of furlough, redundancies or even challenges such as home-schooling impacting how much can be earned.
Many of those that had managed to save have been forced to raid the savings pot to survive. Others have had to cut spending and costs drastically to make ends meet. Among these budget cuts pensions have also been hit, with Royal London saying that two in five millennials had paused or stopped contributing to their pensions during lockdown last year. Affordability was cited as the most common reason.
The impact on health
Financial worries feed directly through to employee wellbeing and engagement, meaning that it’s important that employers take it seriously too. In 2019, 73 per cent of employees said that money worries impacted them at work and that figure is likely to have rocketed since the pandemic hit. The distraction can mean disengagement and poor concentration, aggravated by associated impacts of financial stress, such as poor sleep at home.
Longer-term, these can quickly evolve into more serious physical and mental health implications, and further impacts on work. According to research, employers know that poor employee financial wellbeing damages business. 22 per cent said it had impacted them through reduced productivity and the same amount saw a loss of talent as a result. Higher absences were reported by almost one in five (19 per cent).
How employers can help
The damage money worries can do is clear, and it’s not surprising the problem has been greatly exacerbated by the pandemic. As such, it’s more important than ever for employers to offer financial wellbeing as part of their wider wellbeing strategies. These schemes should be aimed at encouraging staff to build better financial resilience to help them cope with the present and the future, ensuring they can continue to weather the impact of the pandemic.
Firstly, the employer needs to understand the needs of their employees, what their financial priorities are likely to be and how they can help them maintain or set savings goals. Analysing employee demographics and reviewing participation and feedback from existing benefits will help employers to understand what’s already working, as well as what additional solutions their employees might need.
Providing easy access to information, education and guidance is an important aspect of any financial wellbeing strategy. Good-quality generic information can be accessed from the Money Advice Service and many pension providers and further impact can be achieved by incorporating a more targeted approach to content and timing. Videos and webinars can be a vital tool in helping to raise awareness and covering more complicated subjects, such as pension options and decisions.
The evolution of remote and digital advice solutions means that employees can access personalised financial counselling or advice which can consider their personal situations, needs and goals, provide them with a clear action plan bespoke to them.
Monitoring sentiment and engagement is vital in keeping employees on track with their savings goals. HR technology and self-assessment wellbeing apps can be useful tools in this, providing staff with resources and guidance on their concerns, as well as giving a feedback mechanism for employers.
Provided as part of a wider financial wellbeing strategy, saving, pay advance and loan solutions provide extra help, either providing convenient ways to save directly from payroll or providing vital cash for those already struggling.
Employers can move the dial and boost motivation further by incentivising saving, either by offering a short term bonus to encourage the savings habit or by longer term matched saving options.
Financial wellbeing can no longer be ignored, for the sake of both employers and employees. Sadly, the pandemic is likely to hit employees’ pockets further still, adding to an already extremely stressful time for many. Giving staff the confidence and tools to better manage their finances during the crisis through accessible financial wellbeing employee benefit solutions will help your staff increase financial resilience and help them to cope. And that will feed through to how they feel and perform at work.