More than three-quarters (77%) of employees in the UK and Ireland have experienced financial stress over the past year, and 1 in 7 describe themselves as financially excluded. It’s a widespread issue and as the cost-of-living crisis enters its second year, one thing’s for certain: employers can no longer neglect what is now a major issue on every business agenda.
So what’s the outlook for 2024?
The Government’s increase to the National Living Wage (up to £11.44 per hour from April 2024) will provide some relief for low-paid workers, and the +14,000 UK employers who voluntarily pay the Real Living Wage (a higher threshold based on the cost of living), can be commended for holding themselves to that standard. Likewise, the 2% cut in main rate employee NIC from 6th January, will also help to ease the burden. But despite these positive measures, inflation remains high at 3.9% and so without the right support, many employees are still facing financial hardship.
As our attention turns to the year ahead, now is the time for all organisations to look inwards and ask: are we doing enough to support the financial wellbeing of our employees? Could we do more?
The cost of financial stress
Of course, it’s not just employees who are weighed heavy by the economic climate. Businesses are also feeling the knock-on effects. On average, financially stressed employees are five times more likely to take time off work, and 54% say that money worries have had a negative impact on their productivity at work.
Unlike the 2008 recession, though, UK unemployment is relatively low at 4%, which means that despite the difficult economic times, employers are still having to work hard to attract and retain the best talent. This is where financial wellbeing is becoming a key point of differentiation. So much so, that 78% of employees would quit their job in favour of an employer who prioritises financial wellbeing. And, when you consider that 69% of employees who have access to financial wellbeing support at work feel more positive towards their employer (and are 52% more likely to stay longer), it’s a strategy that makes every financial sense.
Mind the financial wellbeing gap
But despite all the evidence urging organisations to invest, many have still to catch up. While 94% of UK employees believe it’s important that employers provide financial wellbeing support, only 18% of organisations have a financial wellbeing policy in place. This points to a significant gap between employee expectations and the current reality.
To attract and retain the best talent, and maintain a happy, healthy, and high performing workforce, employers must prioritise financial wellbeing. And not just at the HR level, but as a core business strategy.
Here are three financial wellbeing trends that we’ll see more of next year as organisations seek to support their people and reduce financial stress:
- A shift towards financial wellbeing support as standard
Only two in ten UK employers currently offers some form of financial wellbeing policy. That will change next year as we see more organisations providing a variety of benefits, schemes, and discounts to support financial wellbeing.
Just some of the many discretionary benefits that employees could receive as part of this include private health insurance, leisure and retail discounts, affordable loans, and access to financial planning tools and services – all of which provide tangible support.
But in the current climate, even these benefits aren’t always enough, and millions of employees are still struggling to make their money last from one pay day to the next. This is where Earned Wage Access (a scheme that enables someone to obtain a percentage of their earnings before pay day) can provide employees with a vital means of paying their bills while avoiding high interest rate loans and credit card debt. According to the Chartered Institute of Payroll Professionals, one in ten UK employers now offers some form of Earned Wage Access, and it’s a number that is set to increase throughout 2024 and beyond.
- Increased awareness of relevant benefits and support
Of course, employees can only leverage these benefits and schemes if they’re aware of them, and this raises a key point: research from the CIPD shows that less than half (45%) of employees who do have access to financial wellbeing support, are actually using it.
HR teams will seek to close this gap next year by investing more time and resources in communicating with employees about the support that is available to them. As part of this, we can expect to see more employers holding regular financial wellbeing workshops and webinars.
But beyond ensuring awareness of available support, there’s also an opportunity here to help employees manage their money responsibly and develop good financial behaviours. Resources such as Moneyhelper – the Government-backed website that provides free and impartial financial support, is a great source of information for everyday budgeting and banking, as well as how to save and reduce debt.
- Harnessing technology to empower financial wellness
Arguably the first line of defence for preventing financial stress, however, is payroll – and more specifically, tech-enabled payroll that ensures accurate and on-time payment. By empowering employees with tools that enable them to track their own pay in real-time, access flexible pay, and find out which state benefits are available to them based on their earnings, employers can provide their people with clarity and peace of mind.
Technology can help in lots of other ways, too. Many people will identify with the stress of applying for a mortgage or rental agreement, for example. Much of that stress is caused by lengthy employment and income verification checks, all of which take place while the person’s future plans remain on hold. These are stressful situations, but it doesn’t have to be this way. Integrated technology that allows employees to access and share their own payroll data with the lender who requires it can speed up verification tenfold and reduce financial stress in the process.
The key thing to remember here is that by empowering employees with financial literacy, guidance, benefits, and tangible support, employers can help to remove a lot of the anxiety that impedes financial wellbeing, and which prevents people from reaching their full potential at work.
