Concerns about contracting Covid-19 and the restrictions imposed by lockdown make the nation’s physical and mental health top priorities. But, with millions of people unable to work, financial wellbeing is a major concern too.
Links between financial wellbeing and other areas of an employee’s health and performance mean it’s something that organisations should take very seriously. “Financial wellbeing has a profound effect on physical and mental health,” says Eugene Farrell, chair of The UK Employee Assistance Professionals Association and mental health lead at Axa PPP healthcare.
“If someone doesn’t have the funds to pay the rent or feed their family, it’s going to have significant effects, leading to mental and physical health problems, relationship breakdown and potentially even domestic violence. It can be like a pressure cooker: the effects aren’t always immediate but over time it can build up.”
Research shows that this pressure can have serious implications for the workplace, with money worries leading to reduced productivity and engagement and pushing up absence statistics. (see box). While it’s positive that the majority of employers believe it’s important to have a financial wellbeing strategy in place, with so many different offerings in this space, it’s important to select the most appropriate approach.
Financial education is fundamental according to Gallagher chief commercial officer Francis Goss. “Employees need to feel confident and empowered about money,” he explains. “By providing them with financial education they’ll have a better understanding of their finances, enabling them to make more nformed decisions.”
A back to basics maths lesson may sound too dull to engage employees but the way in which it’s delivered can capture their financial imagination. In particular, Goss recommends using interactive animations. “These can create a personalised learning journey that’s so much more engaging than a booklet full of text.”
Modelling tools are another powerful way of teaching good money habits. Again, these support personalisation, allowing employees to check out what happens if they change how much they save, delay a pension contribution or increase debt repayments.
Research by the Financial Capability Lab, a project run in partnership with the Money Advice Service, the Behavioural Insights Team and Ipsos Mori, demonstrates how powerful these tools can be. It found that where individuals were given an interactive slider to show them the effects of paying more than the default repayment on a credit card, it led to higher repayments.
Personalising financial education is also recognised as key by Aston Lark director Sam Mistry. “Financial stress isn’t dependent on factors such as age, sex or income level so it’s impossible to tell what support an employee needs,” she says. “Using technology, perhaps through an app or interactive tools on a website, enables them to select the information they need.”
Money may be a personal matter but it’s also important that employers see some return for their investment in financial wellbeing. Wealth at Work director Jonathan Watts-Lay says that although it’s noble to improve employees’ financial wellbeing, there needs to be a measurable objective. “You could survey employees to find out what money concerns they have but you might also want to use data on things like pension contribution levels, benefit take-up or employee assistance programme (EAP) usage,” he explains. “Seeing improvements in these baselines can justify the investment in financial wellbeing.”
While this can keep the finance director happy, Watts-Lay also acknowledges that some elements of a financial wellbeing cannot be measured. “It has to be a push and pull strategy. An employer can track how interventions improve pension contributions for instance but it’s still important that they provide support for money issues such as debt, which they won’t necessarily be able to measure,” he adds.
Coronavirus cash concerns
Any financial wellbeing strategy also needs to adapt to changing needs, with the coronavirus pandemic an obvious example. “Many employees will be under increased financial pressure,” says Aon area director Martin Parish. “Whether they’re still working or not, there’s a lot of uncertainty around income and job prospects. Employees may be dipping into savings, investments and, for some, retirement plans could be completely derailed.”
Also adding to the financial stress is the growth of scams on the back of the crisis. As well as increased activity around pension and investment scams, criminals are also exploiting coronavirus concerns with phishing attempts linked to HMRC tax rebates and fines for breaking lockdown rules. Against this backdrop, organisations can take a number of different steps to support their employees’ financial wellbeing. EAPs are a particularly valuable tool, with Farrell saying his organisation has seen an increase in call volumes. “An EAP can provide practical assistance including debt and legal advice if someone is concerned about their job or their rental property for instance. In these times of fake news, they are a trusted source of information.”
As well as providing an EAP, organisations can also help employees get to grips with the support being offered by the government. Advisers are playing a key role in this, for example Aon has delivered a webinar on managing health and financial wellbeing and Wealth at Work has put together an information pack, as Watts-Lay explains: “We’ve rounded up all the government initiatives that are available but also provided details of the implications of taking different actions. As an example, if someone decides to take a three-month mortgage holiday, we can show them what this might mean for their finances.”
Employers can use their existing package of benefits to help employees too. “It’s a good time to help with practical money tips,” says Mistry. “Flag up benefits such as discount vouchers and virtual GP services as they might be more useful at the moment. Similarly, providing all the information to enable them to cancel a season ticket loan can also help an employee’s cash flow.”
And, just as some people are using lockdown to get fit or learn a language, Parish says it could also be a great time for employers to encourage employees to actively engage with their finances. “Employers should be talking to their employees about why the value of their pension and investments has fallen and explaining why this isn’t the time to panic and sell up,” he explains. “Employees need this reassurance right now and, by helping them engage with their finances now, it will encourage positive changes in financial behaviour further down the line.”
BOX: Financial Wellbeing and Employee Health and Performance
Numerous studies and research projects have highlighted the link between financial wellbeing and employee health and performance. These are some of the findings:
- 77% of employees with money worries say it affects them at work (1)
- 88% of employers believe staff worry about money, with 86% saying it affects their performance at work (1)
- 70% of the workforce spend a fifth of their working hours worrying about money (2)
- 78% of employers believe there’s a link between financial worries and increased stress levels; 43% with lower productivity; and 31% with absenteeism (3)
- Employees with financial worries are 4.1 times more likely to be suffering from anxiety and panic attacks, and 4.6 times more likely to be suffering from depression (4)
- Absenteeism and reduced productivity, engagement and retention due to money worries cost employers between 9% and 13% of total salary cost (4)
- 6.2 working days are lost to absence in employees with high financial stress, compared with 3.8 working days in those with low financial stress (5)
- 19% of employees report physical fatigue caused by lost sleep worrying about money (6)
- 90% of employers believe it’s important to have a financial wellbeing strategy in the workplace (7)
(1) Financial Wellbeing Index 2019, Close Brothers. (2) The DNA of Financial Wellbeing, 2016, Neyber. (3) Reward survey, 2018. (4) The Employer’s Guide to Financial Wellbeing 2019/20, Salary Finance. (5) Global Benefits Attitudes Survey, 2016 Willis Towers Watson. (6) Employee Financial Well-Being, 2019, CIPD and Close Brothers. (7) Wealth at Work online p