January is typically a month when we assess various aspects of our lives and at the top of that list for most this year will be our financial situation. Over the last few years employers and employees have felt a significant pinch, starting with the implications of the pandemic and through to the current cost of living crisis. For many, every penny really does count and this has prompted greater interest in financial wellbeing and what that means for businesses and their people.
What is financial wellbeing?
On a very basic level financial wellbeing for individuals is about a sense of security and having sufficient money to meet our needs so that we feel in control and have choices. Financial wellbeing can be directly correlated with the first two stages of Maslow’s Hierarchy of Needs in which food, shelter and clothing are among the basics. This correlation is backed up by the CIPD’s Reward Management Survey 2022 in which 90% of workers said that earning enough to allow them and their family/loved ones to enjoy a reasonable and dignified lifestyle was important to their financial wellbeing.
From an employer’s perspective the financial wellbeing of their business is about various factors and managing them to avoid financial difficulty. HSBC summarise these factors into four broad categories: cash flow, profitability, management and external influences – macro economic factors. If any of these elements is negatively impacted then the financial wellbeing of a business can be in jeopardy and so it is important to understand and assess them all regularly to prevent problems from arising.
What is the impact of poor financial wellbeing?
If employees are faced with poor financial wellbeing the ramifications can be far reaching. Many households are facing the very real choice between heating and eating due to the spike in energy prices and statistics from the Trussel Trust paint a worrying picture. Between 1 April 2022 and 30 September 2022, food banks in the Trussell Trust’s UK-wide network distributed 1.3 million food parcels to people facing hardship, that is an increase of 52% compared to the same period in 2019. They also report that 20% of people referred to their network of food banks are from households where someone is in work which would indicate that for some having a job does not prevent financial hardship. Employees are also faced with rising transport and fuel costs and this can lead to staff being unable to even afford to get to work.
The effect of financial difficulties for employers is also forcing many to make difficult decisions. Whilst the overwhelming majority of employers are sympathetic to the issues faced by their staff they are also encountering increasing operational spending due to increases in costs of materials, transport, rent, energy and other consumables which means that putting up salaries for beleaguered employees is not always an option. In fact, employers are increasingly looking at cutting staff numbers as a way to reduce costs. Data published by Statista shows that 51,000 redundancies were made in the UK in the three months up to May 2022, that figure has increased constantly since then and hit 89,000 in the three months to October 2022.
How can financial wellbeing be improved?
Beyond wages, employers can help improve financial wellbeing for their employees through other means. Many employees aren’t aware of all the benefits available to them and how to access them and it is important for employers to develop this awareness and improve how they promote benefits so that employees can get the most out of them. Financial education is essential, employers can signpost staff to a wide range of free, confidential, independent support available via various government funded programmes such as Money Helper. Alternatively, they can facilitate education in the workplace through a financial wellbeing strategy that may include access to free financial advice sessions, support from a credit union, debt advice, retirement planning courses or a free will via a local solicitor. Employers can also help themselves and their employees by engaging with staff to find out what benefits appeal to them and what support they need so that they can optimise any measures that are put in place around financial wellbeing. There is no value to either party in benefits as a tick box exercise and in fact employers are often wasting time and money on benefits that their staff neither use nor want. By having a focused approach, even if it is just around a small handful of core benefits that make a difference, this will result in enhanced financial wellbeing for employees and any spend from employers will add value and provide a return on investment through engaged, motivated and productive staff.
Do you have any questions about todays blog, need help in becoming legally compliant with contracts/policies or can we support you in taking away any people pains to give you peace of mind?
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