Financial wellbeing in the workplace: a guide for employers

In recent years, financial wellbeing has become a hot topic in the workplace. Increasing numbers of people have found themselves having to deal with money worries. This can have a negative impact on their mental health, their productivity, and their career prospects. Fortunately, a growing number of employers are making their workers’ financial wellbeing a priority. In this article, we look at what financial wellbeing means, why it has become so important, and some practical steps employers can take to help both their staff and their business.

• What is financial wellbeing?
• Why has financial wellbeing become more important?
• What impact can poor financial wellbeing have on work?
• What are the benefits of supporting employees’ financial wellbeing?
• How can employers support staff?
• What resources are available for employers and employees?
• Where can employers go for further assistance with employee wellbeing?

What is financial wellbeing?

Financial wellbeing relates to how in control and confident you feel about your finances. If you have a healthy relationship with your money, you can make good choices for yourself and your loved ones and put yourself on track for a healthy financial future. Having good financial wellbeing is a key component in living a happy and fulfilled life.

On the other hand, people with poor financial wellbeing may have difficulty managing their money, which can lead them into debt and the hardship this can cause. People may not have enough money to adequately cover their cost of living, meaning they need to prioritise their spending. For example, increases in both energy and food costs force some people to choose between eating or heating their homes.

Why has financial wellbeing become more important?

Unfortunately, in recent years more people have faced money worries, which has highlighted the impact of financial wellbeing in the workplace. The annual growth in salaries slumped after the financial crisis in 2008. In 2000, household debt as a proportion of GDP was just over 60%. This increased to over 90% after the financial crisis and was still as high as 84.9% in 2022/23.

Since 2021, more people have faced financial problems because of the UK’s cost of living crisis. A combination of factors including the COVID-19 pandemic and the Russian invasion of Ukraine have led to major supply-chain issues, soaring energy costs, rising food prices, and the highest level of inflation for 40 years.

The net result is that more people are experiencing a squeeze on their household finances. This is particularly pronounced for younger people who are typically on lower incomes, many of whom will not have experienced such a decline in their disposable income during their lifetimes.

Poor financial wellbeing also has knock-on effects for the economy. Alarmingly, research by Neyber in 2019/20 concluded that money worries result in a £120 billion annual cost to the UK, and 17.5 million lost working hours. For employers, helping employees with their financial wellbeing could have a positive impact on their businesses.

What impact can poor financial wellbeing have on work?

Poor financial wellbeing can have a highly detrimental effect on an employee’s productivity and health. The research by Neyber found that:

• 25% of employees have lost sleep because of money worries
• 59% report that current money issues result in poorer performance at work
• 46% say financial concerns affect their relationship with their manager

These are not isolated results. Recent research from the Chartered Institute of Personnel and Development (CIPD) found that 28% of employees said money worries had negatively impacted their work performance. This figure rose to 36% among people earning less than £20,000 per year. Employers should not see money worries as solely a problem for those on a low income though – 20% of those earning over £60,000 or more said their financial wellbeing has worsened.

Of those affected by money worries, the most common reported symptoms were lost sleep, health problems that included stress and anxiety, and issues with concentrating or making decisions at work. A significant number of people also reported dealing with their money problems during the working day.

What are the benefits of supporting employees’ financial wellbeing?

Supporting employees’ financial wellbeing has many benefits for employers. The right support can help improve workers’ physical and mental health, reduce their stress levels, increase productivity, and reduce absenteeism. By helping to improve their financial wellbeing, you can help employees improve their motivation, morale, and outlook.

How can employers support staff?

Perhaps the most practical way employers can support staff is by implementing a financial wellbeing policy and making sure that employees are aware of the help available to them. This can be set up as a standalone policy, or it can be incorporated into an overall employee benefits and wellbeing package.

Financial wellbeing policies vary from organisation to organisation. At their simplest, they may commit to signposting employees to independent help with money or debts. But there is more that employers can do, such as offering low-interest loans, pension workshops, and supportive education on things like money management and budgeting.

The CIPD recommends that a good financial wellbeing policy should include the following six strands:

1. Signposting to financial wellbeing advice (see resources, below).
2. Targeted financial education support at key moments, such as before maternity leave.
3. Offering finance-friendly initiatives, such as allowing employees to choose when the frequency that they are paid.
4. Flexible working policies, allowing carers to work enough hours to meet their financial commitments.
5. Giving employees security over their working hours and supporting their progression into higher paid roles.
6. Committing to paying at least the Real Living Wage (this is voluntary and is higher than the statutory National Minimum Wage and National Living Wage).

In addition to these recommendations, there are many other ways employers can support their workers’ financial wellbeing. Options worth considering include:

• Employee benefits. A good employee benefits package can help boost workers’ financial wellbeing. This could include critical illness cover, income protection (in case of being unable to work because of illness or injury) and flexible benefits such as salary sacrifice schemes for childcare, bikes, technology, and gym membership.
• A good pension. If you offer employees a good workplace pension scheme and make more than the minimum employer’s contribution, it helps secure workers’ financial futures.
• Low-cost or interest-free loans. You can help employees by offering low-cost loans for financial emergencies. If workers commute, providing an interest-free loan to cover the upfront cost of annual rail passes can be beneficial.
• Health support. Financial worries can lead to mental health problems. You can support employees by offering mental health and wellbeing training, nominating trained mental health first aiders, and even providing independent advice lines. A formal Early Intervention Scheme can also support employees who are absent because of mental health or musculoskeletal problems, even if they are pre-existing conditions. Health cash plans cover the cost of things like eye tests and prescriptions, which employees might otherwise forego if under financial strain.

What resources are available for employers and employees?

There are many resources to help both employers and employees with financial wellbeing. You may find the following particularly useful:

• Money Helper. Help and advice about money, pensions, and debt provided by the Money & Pensions Service, an arms-length body sponsored by the Department for Work and Pensions.
• Citizens Advice. Offers help with a wide range of debt and money issues, from benefits and budgeting advice to dealing with mortgage or rent arrears.
• CIPD. Has excellent financial wellbeing resources for employers.
• NHS. Provides a useful guide to financial wellbeing.
• StepChange. This debt charity offers financial wellbeing resources, workshops, and seminars.

Where can employers go for further assistance with employee wellbeing?

If you are an employer who would like help with improving your employees’ wellbeing, there’s plenty of assistance out there.

A good first step is to talk to other employers who have already taken steps to improve financial wellbeing in the workplace. Ask them what measures they’ve put in place, what’s working and what has been less successful. Learn from their experience and advice.

Just as important is to talk to your employees. Ask them what would help their wellbeing at work in general, and their financial wellbeing in particular. Topics like money and mental health can be very emotional, so consider letting staff feedback anonymously.

It’s also important to think creatively. While in an ideal world you’d be able to increase salaries further, this isn’t always possible – particularly in tough economic times. However, offering employee benefits and insurance that supports your employees’ wellbeing can both be cost-effective ways of improving financial wellbeing.

Every organisation is different, but if you take steps to make your workplace an environment in which individuals feel they can get help with their money worries, it can encourage them to seek assistance at an early stage. Do provide practical support, but don’t forget that having someone on hand to provide friendly and impartial advice can be one of the most powerful tools for improving employees’ financial wellbeing.

At Alan Boswell Group, we offer a holistic employee benefits service which starts with providing an environment for employees to speak to us independently about any aspect of their financial affairs. Often, it’s just as important to provide employees with the opportunity to be heard, rather than a specific financial product that will solve their problem. For advice on financial wellbeing at your workplace, and how we can help, contact our team on 01603 967967.