How to support employees’ financial wellbeing in the cost-of-living crisis

At a glance

Financial wellbeing is increasingly important for employers as the rising cost of living puts more pressure on staff.

The effects of poor financial wellbeing on businesses include staff absences and loss of productivity. An estimated 13 million worker days are lost each year due to financial worries1.

A financial-wellbeing programme can help staff to feel more supported and in control. Find out what’s important to your team and create a solution that fits their priorities.

Most owners of small and medium-sized enterprises (SMEs) care deeply about the wellbeing of their staff – whether that’s mental, physical or financial. They can also see how much these areas impact an individual’s performance at work. Financial wellness is a particular worry as the cost-of-living crisis and rising household debt continue to heap pressure on employees.

A 2023 Chartered Institute of Personnel and Development (CIPD) report2 says managing employee financial wellbeing is rapidly climbing the social, political and business agendas. The potential for significant rises in financial distress and in-work poverty – which one in eight workers already experience3 – means more businesses are looking for ways to help reduce the burden on their staff.

Even if pay rises are unviable, there are many ways you can support your team during this challenging time. This article looks at what financial wellbeing means, why It’s so important for employers, and how you can support it in ways that benefit your staff and your business.

What is financial wellbeing?

Financial wellbeing is an individual’s ability to make the most of their money, including dealing with unexpected costs, planning and saving. This ability helps us feel secure, confident and empowered. Healthy financial wellbeing might also include knowing there is a bit left over for non-essentials, such as holidays.

Unfortunately, many people in the UK fall outside this definition. The Money and Pensions Service found that 45% of adults do not feel confident managing their money4, and estimates that nine million people in the UK have no savings, while another five million have less than £100, leaving them incapable of withstanding financial shocks5.

Why is financial wellbeing important for employers?

According to research by the Centre for Economic and Business Research (CEBR)6, 10% of employees have missed days at work due to financial worries – roughly 13 million worker days lost each year. And 18% of workers reported a decline in productivity due to financial worries. Financial distress costs UK firms £6.2 billion each year – or an estimated £4,544 lost for each small business and £22,746 lost for each medium-sized business annually.

Katy Foster, Senior HR Consultant at Cream HR, says: “When employees are concerned about their financial wellbeing, their work cannot help but be affected. Employees may feel constantly anxious, downbeat and unengaged. Often, there is a solution, but it can be hard to find through the anxiety and fear. Employees who have fewer of these worries and know they have a manageable plan will be able to concentrate better at work and perform much better.”

To this end, the CIPD research found that 65% of workers say it’s important their employer has a financial-wellbeing policy. This rises to 81% among those who already benefit from such a policy – showing how much people value this when they receive it7.

How employers can help

You can support your team in many ways, even if economic times are difficult and pay hikes aren’t realistic. But it may involve some creativity.

Simple things could go a long way to helping people reduce their outgoings – for example, you could provide lunches or introduce a car-sharing scheme. You could try offering more flexible work times or fewer days in the office to allow staff to reduce travel costs. And more substantial benefits could make a huge difference – these include tailored access to discount schemes and vouchers, financial education, debt counselling and professional financial advice.

How to design a financial-wellbeing programme

To improve financial wellbeing, start by defining the business case, including how initiatives could improve recruitment, retention, engagement and productivity.

Speak to your employees, and use feedback surveys and any internal and external data – such as income data versus national averages – to find out about their financial priorities. This will help you tailor any changes you make to achieve the best value, rather than attempting a one-size-fits-all approach.

“Employees may not want their employers to know about their financial situation, so feedback should be confidential so they can access it comfortably,” says Katy.

Assess the adequacy of any existing financial-wellness programmes and consider improvements based on your research. Model and test your proposals. Implement them with a robust employee-communication programme. Monitor the programme’s success and follow up with more improvements where necessary.

How financial advice can help

Financial advice is a growing part of the overall wellbeing package in many firms. With inflation, debt and gambling-related issues growing, access to professional advice can be critical to many firms’ employee-support packages.

Financial planners can help by offering tips and solutions on controlling debt, investments, pensions and other financial decisions. They can also coach individuals around their abilities, mindset and behaviour, and provide connections to other specialist advisers – all of which are key to improving financial wellness.

“Access to objective, financial advice can be invaluable for many employees, especially those with large debts,” says Katy. “Providing support to help them talk openly about their concerns and seek practical solutions can help someone feel less anxious and more positive about their future.” Offered sensitively, such advice is a great way to support your employees, she adds.

Speak to us to discuss how financial advice can benefit your people through our UK-wide Workplace Financial Wellbeing Programme.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

Sources:

1,6CEBR, ‘Financial wellbeing and productivity in the workplace’, November 2021
2CIPD, ‘Employee financial wellbeing: a practical guide’, February 2023 
3Joseph Rowntree Foundation, ‘UK Poverty 2022’, January 2022
4The Money & Pensions Service, ‘UK Adult Financial Wellbeing Survey 2021’, published October 2022 (From a nationally representative survey of 10,306 adults living in the UK)
5The Money & Pensions Service, ‘One in six adults have no savings’, November 2022 (From a survey of 3,000 UK adults)
7CIPD, ‘Reward management survey: Financial wellbeing and organisational support’, April 2022 (From a survey of 2,500 UK workers)

SJP Approved 12/10/2023

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