As the UK continues to grapple with the unknown territory of living alongside a pandemic, over 1.5 million people are experiencing a combination of financial debt and mental health problems (The Money and Mental Health Institute). The ambiguous climate of the UK leaves employees exposed to confusion and uncertainty but also the opportunity of growth and new opportunities. One topic of conversation is the growing importance of financial wellbeing for employees.
The past 18 months have highlighted the truly unpredictable nature of life, but, through this, the need for security and stability has become increasingly desirable for employees. Financial wellbeing and resilience are imperative for our quality of life, enabling us to enjoy ourselves both now and in the future.
So, what financial lessons have we learnt from the pandemic? Using research from the Aviva report “Thriving in the age of ambiguity: building resilience for the new realities of work”, we can question why financial wellbeing for employees is becoming increasingly more important. And why is it so important for employers to pay attention?
What is financial wellbeing for employees?
Financial wellbeing for employees is a sense of security and safety, feeling as though you have enough money to cover your needs. However, financial wellbeing is not just about having enough money to pay for everyday living. It is also about control. Control over future finances, control over day-to-day finances, control over financial freedom to be able to do what you enjoy most in life.
Employees with financial wellbeing can prioritise the things that are meaningful to them, without the constant cloud of financial difficulty hanging over them, both now and in the future.
Financial wellbeing is closely linked with mental health, where the stress caused by debt and anxiety around day-to-day living costs can take over an employee’s outlook on life. Increasing the feeling of control over finances improves mental health, giving employees a sense of autonomy.
The climate of the UK and the growing importance of financial wellbeing
Attitudes towards the importance of wellbeing have been accelerated by the unprecedented events of the last 18 months. The pandemic has intensified financial inequalities amongst employees, with everyone having to face their own specific financial needs. These can range from cost increases in childcare, furlough schemes, going part-time, redundancies, supporting family members, decrease in career drive – the list of how the pandemic has affected our everyday lives is endless!
Alongside the ambiguous climate of a post-pandemic UK, increases in taxes will also heighten anxieties around financial wellbeing. The 1.25% rise in the National Insurance tax confirmed to be in place by April 2022 is just another concern to consider during this time.
However, despite these emerging circumstances causing an increase in anxiety and monetary strain, how are employees responding? Can employees build on their financial wellbeing and learn from the obscure events of 2020 / 2021?
Negative and positive impacts of the pandemic on financial wellbeing for employees
Financial wellbeing for employees is personal to each person. This means that every employee’s financial response and outcome from the pandemic is specific to them. Whereas some employees have been able to raise their financial wellbeing, others have reduced incomes and facing larger debts than ever before.
Some of the positive and negative outcomes of the pandemic on the financial wellbeing of employees are divided below.
- Two in five (41%) of employees say the pandemic has positively impacted their ability to save
- 39% of employees say their total debts have decreased over the last 12 months
- Working from home / remote working saves money – travel costs/lunch
- Around a third of employees say they are now more confident in feeling prepared for another financial crisis (Close Brothers research)
- 24% of employees feel they made bad decisions about debt during the pandemic – with 51% being 18–24-year-olds revealing how young people have been the most vulnerable to financial hardship
- 83% of Gen-Z and 71% of Gen-Y agree that finances sometimes control their lives
- 15.9 million people consider themselves more financially vulnerable than they did in March – with 33% saying reduced income was the main reason for this (Royal London research)
- Millions of employees existing on a reduced salary, and many more whose wider household incomes have dropped due to a reduced income from a partner or family member
- Two in five employees have been more worried about their financial health in lockdown (Close Brothers research)
- More emphasis and anxiety on finances means a decrease in productivity at work – damaging health and wellbeing and relationships both in and outside work
Although some employees will have maintained a healthy financial wellbeing standard over the last 18 months, every single employee has been impacted by COVID in some way or another, whether that’s negatively or positively.
Those fortunate enough to have saved during the pandemic, or maintained their high earnings, also face challenges in response to COVID. Knowing how best to invest money, or to understand and avoid tax traps, can prove extremely difficult without the right support! Check out Engage Wealth Management for their extensive advice on investments and pensions, getting support either on an individual or corporate level.
To summarise, using the Aviva 2020-2021 study:
- 57% of employees are getting by financially
- 39% of employees say their financial situation is affecting their mental health
- 30% of employees are concerned their money won’t last
- 26% of employees say their current level of debt is affecting their wellbeing
How can businesses approach financial wellbeing for employees?
With financial wellbeing for employees becoming more and more important, employers must find ways to adapt and keep up to date with their staff needs and how they can promote wellbeing at work.
A well-structured financial wellbeing strategy (as part of the overall employee benefits strategy) will focus on education and advice for employees, promoting personalisation for individual circumstances and needs. Organisations can tailor the support they provide by acknowledging the differences between staff – personality, age, gender, disability.
Below are some recommendations for employers to help make financial wellbeing more of a priority at work:
- Provide accessible information in a variety of ways e.g., events, apps, open discussion, one-to-one advice
- Creating a safe and open space for discussion
- Personalised financial education – also targeting overall wellbeing
- Supporting the Living Pension – ensuring workplace pension produces a minimum standard of living in retirement
By establishing a personal approach to financial wellbeing for employees, it gives staff the confidence and feeling of control that is needed when approaching financial issues. It also promotes your company as providing for the future wellbeing of employees, retaining loyalty and an atmosphere of trust in the workplace.
How can Engage help?
The influence and importance of financial wellbeing for employees are only becoming more obvious as we continue to face the repercussions of the pandemic – financial wellbeing leads to mental & physical wellbeing and then to a thriving positive workforce!
The key to a strong financial wellbeing strategy is personalisation, which is something we promote at Engage. We use People Centred Design to create and implement a benefits strategy that resonates with your culture and is loved by your employees.
There are no one-size-fits all approaches when it comes to looking after your staff and as we face continuing struggles, we must become even more adaptable to individual’s needs. The pandemic has made the importance of having the control to be able to pay for experiences we love and things that make us happy even more of a priority.
Look here to see which financial services Engage can help with.
Contact us through Engage Health Group where we give free no-obligation advice and support and find more on how to tailor financial wellbeing to your specific needs.