Employee wellbeing has shot up the priority list for senior leaders over the last few years, as open conversations around mental health have increasingly entered the workplace. Now, following the challenges presented by the cost-of-living crisis, a sharper focus is being placed on one area in particular – financial wellbeing. As increasing numbers of employees struggle with rising bills, higher mortgage payments and the inflated cost-of-living, many are turning to their employers for assistance. This raises two questions – why do employers have a responsibility to their employees to nurture financial wellbeing, and how can they empower them to take control of their own finances?
Why financial wellbeing belongs in the workplace
Nearly three-quarters (72%) of UK employees say they worry about money at least once a week, as the ongoing cost-of-living crisis continues to create financial challenges for individuals up and down the country. Although the workplace has increasingly shone a spotlight on mental health, financial wellbeing is another crucial component that is critical to overall employee happiness. Yet this is an area that has been somewhat neglected by employers. Alongside benefits to employee wellbeing, boosting financial wellbeing has other tangible benefits for employers, including increasing attendance, performance, and retention.
In fact, a 2022 report found that there is a significant gap between an employees’ need for better financial wellbeing support in the workplace and employers’ perceptions of what these needs are. While concerns about money are clearly rising among UK employees, some employers may not even be aware of the role they can play to alleviate some sources of stress around costs.
Understand why employees may be struggling with financial wellbeing
For employers, the key to addressing financial wellbeing with tact is the ability to have an holistic understanding of why employees may be struggling with meeting payments.
Financial wellbeing often can be broken down into a two-pronged approach – firstly, the ability to resist depletion and, secondly, the ability to save. Recent interest rate hikes and the ongoing cost-of-living crisis means that many employees’ savings will have been depleted. Without savings, and with monthly pay packets increasingly stretched, employees are less able to meet the challenges of unexpected bills, an increase in mortgage payments, or changes in their living situation. These challenges can lead some to even take out payday loans or additional credit cards to cover costs. That can make it yet more difficult for individuals to save, and can lead to greater financial instability if they find themselves in unsustainable debt.
When talking about financial wellbeing, it is crucial that employers have a clear understanding of how an employee may have gotten into a difficult financial situation, and avoid placing the blame on that individual.
How can employers empower employees to take control of their own finances?
Initiatives such as financial wellbeing workshops and talks can go some way to raising awareness of money management schemes, but most employees will have a better understanding of their finances than an employer will do. As a result, the best financial wellbeing tools a workplace can implement are ones that empower employees to take control of their payroll.
- Earned wage access
Earned wage access is one benefit that employers can offer to allow employees to take full control of their finances and cover short-term cash flow problems. It enables individuals to access money they have earned throughout the month, rather than counting down the days until payday. This can be particularly beneficial for those who may be financially excluded and unable to borrow through traditional credit options, or for those who have started a new job with a new payday and who may struggle to meet direct debit commitments. Likewise, for many employees, particularly those with children, waiting until payday isn’t always an option to cover costs for things like lunches or school trips.
In the absence of flexible pay, employees tend to go without or pay bills late, incurring charges and letting further financial instability become entrenched. Flexible pay acknowledges that there are peaks and troughs of spending throughout the year, and gives control back to employees to take full ownership of their money management, without having to incur interest payments.
When flexible pay schemes such as Wagestream are implemented, 86% of employees say they feel less stressed, 73% use payday loans less, and 72% say they feel more in control with of their finances. Likewise, organisations feel the benefits of increased employee focus, commitment and retention, with an 11% increase in hours worked as well as a 16% reduction in employee turnover.
- Real-time pay information
Providing real-time pay information means that any changes to an employee’s payroll record are visible immediately, without having to wait until the end of a pay period. This more accurate and frequent data means an employee’s payslip can be updated in real-time. Employees will therefore have greater visibility of what they are earning, as they earn it – that will lead to better financial decisions and wellbeing by improving the potential for budgeting and their ability to save. Real-time payroll also supports an employer’s payroll team and empowers them by freeing up time which has previously been used dealing with payroll enquiries, so they can focus on more strategic tasks.
The cost-of-living crisis has amplified concerns around money-related stress and its associated impact on financial wellbeing, so now is a crucial time to take action. Failing to confront the issue will not only impact employee happiness, but it will also hinder attendance, performance, and retention too. Employers must empathetically understand the root causes of financial struggles, such as depleted savings and rising living costs, and work with individuals to reach suitable resolutions – empowering workers with earned wage access and real-time pay information can go a long way to achieving this.
