How to engage employees in their finances to reduce stress

Financial wellness and the workplace

A commonly used definition of financial wellness is having an understanding of your financial situation and taking care of it in such a way that you are prepared for financial changes in your life. Maintaining this balance consists of being comfortable with where your money comes from and planning for where it is going in the future.

The Money Advice Service (MAS) recently found that more than 16 million people in the UK have less than £100 in savings

According to recent research from Barclays of 100 UK employers, nearly half (46%) of employees worry about their finances, 20% avoid thinking about their finances because they find it upsetting and 18% lose sleep due to financial stress.

What are the ramifications for employers? PWC employee financial wellness research highlights that of those employees who are stressed about their finances, 48% are distracted at work and 50% spend 3 or more hours a day dealing with financial matters. Lost productivity resulting from financial related stress in the workplace is believed to equate to 4% of UK employers bottom line, totalling almost £19bn.

The causes of financial stress

What are the causes of financial stress? CIPD financial well-being research shows that the biggest causes of stress and detractors from positive financial well-being are 1) only just earning enough money to get by 2) associated hassles involved with saving 3) the time it takes to manage money 4) difficulty in interpreting financial jargon.

Another key factor we face is the use of technology in our daily lives, making it easier to spend the little disposable income we have left after rising living costs with the click of a button. Social media bombards us with images promoting celebrity fashion lines or their favourite holiday spots, subconsciously draining our will power to save. It’s unfortunate that celebrities don’t post about their retirement goals and share the financial planning advantages they are getting by paying very large fees to tax planners and financial advisers.

Despite all of this, some published reports still do not identify people's finances as a root cause of stress in the workplace and tend to focus more on internal work activities such as Acas’ stress at work report. This leads us to ask whether enough focus is placed on helping employees with stress at work that is driven by external factors as well as work related activities.

How to ease financial stress for your employees

What does this information tell us and what can be done to help ease the effects on financial stress on productivity in the workplace? Recent market research shows us: 49% of staff feel their workplaces should do more to make them better informed about their finances (Source: City AM), Two-thirds of 18–24-year-olds value savings as part of their overall financial wellbeing (Source: YouGov) and 78% of employees believe that having a savings nest egg would help with their everyday stress levels (Source: YouGov for Unum). 

I’m sure we all know the saying, ‘give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.’ It simply isn’t possible to just pay off all our employee’s debt and give them additional money to booster their savings pots, added to the additional costs of rising pensions auto-enrolment minimum contributions. It is far more achievable and cost effective to educate them on how to manage money and make available solutions that help people get into better financial habits.

Financial literacy is a major problem. Financial planning has only very recently started being delivered in schools and financial advice is only readily available to those who can afford it, how can we expect our fellow human beings to learn healthy financial habits, when there is such an impetus to spend? Providing financial education programmes, especially to our younger workforce, should be a primary objective.

This would empower employees to understand simple things from how budgeting money works and getting best value from energy suppliers, to understanding how much we need to put away now to afford the things in life that matter to us most; buying a house, family planning and retirement. Education can be delivered both online and during face to face in seminars, making it easier to address all employees in an increasingly changing work environment.

As well as helping to educate, we can make doing the right thing easier for our workforce, by including financial wellbeing products in our benefits packages to support employees at all stages of their financial journey. We can assist our employees in achieving their savings goals by providing workplace ISAs that can be funded through employee net pay, to help support better savings habits and reduce the risk of spending before you save.

We are seeing some innovative employers allow pension funding to be directed into alternative pension and investment products to help employees achieve goals like buying their first house. This re-direction of pension budget receives greater recognition, appreciation and engagement with employees.

Additionally, debt consolidation products can be used and positioned by third parties to help reduce the cost of debt associated with using pay day loans found on the high street where APR is typically a 4 figure %.

It’s now time to probe financial stress as a cause of stress in the workplace and empower employees with simple education and savings tools to make good financial decisions.

Article by

NatWest Cushon