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 some incredibly difficult financial circumstances at present due to increasing prices and statistics from the Trussel Trust paint a worrying picture. In 2023 just under 3 million people received emergency food parcels from the Trussell Trust’s foodbanks, a year on year increase of around 800,000 when compared to the previous year. The charity 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 impact of poor financial wellbeing can be really damaging. Employees might not be able to afford to wash their uniform, they might be skipping meals so that their children have enough to eat and their general wellbeing will suffer. The stress and anxiety of financial concerns should not be overlooked as this can have a significant impact on an employee’s mental and physical health. A recent article suggested that the low rate of statutory sick pay is driving presenteeism as employees simply can’t afford to be absent from work even if they are ill, so essentially financial wellbeing concerns mean that staff attend work when they really shouldn’t.
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. The recent increase in the national minimum wage and national living wage rates though have forced the hand of employers but for many that has meant passing on costs to customers or reducing staff. Data from the Office for National Statistics shows that the redundancy rate for the period from December 2023 to February 2024 was 3.9 per 1000 employees, it will be interesting to see the next rate and whether or not that increases after the minimum wage rate changes in April 2024.
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.
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Why not also check out our blog on a similar topic Social & Financial Wellbeing
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