Employers guide to employee financial wellbeing

This Wollit guide will cover the basics of financial wellbeing from an employer’s perspective. It will also look at how to start planning and implementing an employee financial wellbeing strategy.

What is financial wellbeing?

Also known as ‘financial wellness’, financial wellbeing is the sense of security you have if your money needs are comfortably met and you have a reasonable financial plan. 

Financial wellbeing, in a nutshell, is the absence of the stress, worry and anxiety that comes with: 

• Unstable income 
• Uncertainty that you can cover expenses – like rent, utilities and transport 
• Inadequate insurance 
• Inadequate savings/emergency pot 
• Not having a budget 
• Being in (unmanageable) debt 

It’s something you might not be aware of once you’ve got it. Like good health, a fast internet connection or even your favourite Netflix series, you only really notice it when it’s gone. 

If you’ve grown up in financial security – or even if you’ve worked your way up and been comfortable for some time – it’s hard to immediately grasp the value. But not having it is distressing and unignorable. 

As we’ll cover later in the guide, the consequences of poor financial wellbeing are catastrophic for your employees and, by extension, your business. 

There aren’t many people who’ve never encountered the gut-sinking clench of financial anxiety. For some, though, it’s a constant reality. 

If those people are your employees, you’ve got a big problem on your hands. 

What’s the state of financial wellbeing in the UK?

It’s not great. The exact figures depend on the study, but somewhere around half of UK employees have money worries. 

While the minimum wage has grown, the rising cost of living – particularly when it comes to housing costs – is leaving employees struggling to stay afloat. Little wonder, then, that so many are also without long-term financial plans or security; especially workers with irregular pay patterns (such as those on zero hour contracts). 

The Financial Capability (FinCap for short) Survey, which looks at behaviours and external factors pinpointed by the Money Advice Service, found that: 

• 22% of UK adults have less than £100 in savings/investments 
• 17% ‘often’ use credit to pay for basics like food and bills 
• 63% don’t feel as if they control what happens with their finances 

Financial insecurity in the modern world

Working practices have changed beyond measure in the past couple of decades. Irregular working patterns (like zero hour contracts) and the rise of freelancing and the gig economy have increased flexibility for both employer and employee. But this flexibility has an unpleasant side effect: a lack of stability.

For an employer, this instability manifests as high staff turnover, poor productivity and unreliable employees. 

For an employee, it means an erratic income, which leads to budget anxiety, and further decrease in their financial wellness.

Why does it matter to my business?

Some 89% of employers agree that financial concerns have an impact on their staff’s performance. 

While the problem itself is commonly understood, the scale is perhaps underestimated. 

The Employer’s Guide to Financial Wellbeing 2018-19, produced by Salary Finance, analysed survey data from over 10,000 employees across 25 industry sectors. In a word, the results were alarming, with some 40% of respondents reporting money worries. 

Salary Finance estimated that a lack of financial wellbeing in the workforce is costing the average employer 13-17% of their total payroll. Moreover, it is costing the economy as a whole around £120bn per year.

Broken down, the effects of money worries include: 

Poor mental health

Of those with money worries: 

• 62% reported sleepless nights because of money worries 
• 50% reported feeling anxious and being prone to panic attacks 
• 46% reported feeling depressed and finding it difficult to carry on with life 

Poor mental health can bring down every aspect of a workplace, from employee relationships to overall productivity. 

Decreased productivity & increased distraction

Of those with money worries: 

• 41% said it affected the quality of their work 
• 44% had trouble finishing daily tasks 
• 1.5 sick days a year (per person) were attributed to financial stress 

A huge amount of time and money is lost each year because of employees’ financial stress.

It’s easy to picture the real-world scenarios. Think about these jobs done poorly because of distracted, stressed employees:

• Security tasks like locking up need focus and attention to detail 
• Restocking done badly leads to missed sales and wasted time redoing it 
• Sloppy cleaning or bad service earns bad reviews and loss of repeat custom 
• Cashing up and stocktakes can be off by a substantial amount 
• Tasks in a client’s home (e.g. cleaning, shopping) can be forgotten or done poorly 
• Deliveries can be incredibly dangerous if done by distracted or overtired drivers 

What all this boils down to is a seriously impacted bottom line. In brief money lost, time wasted. 

All these seemingly unconnected issues could stem from one problem, and it’s one that many business owners hadn’t even considered. 

High staff turnover

• 24% of people with money worries said they were looking for a new job (compared to 11% with no financial worry) 
• Over a third of employees would switch firms if the rival ‘put financial wellbeing as a priority’. 

A lack of cohesion and loyalty plagues workplaces with high staff turnover – to the point where it can be difficult to attract new talent. In addition, the more measurable costs of recruitment and training can rapidly add up. 

Brand perception

It might pale in comparison to the human impact of financial issues, but business owners must inevitably consider their public image when it comes to policy changes. 

Introducing a financial wellness scheme, or partnering up with a service delivering financial wellbeing, is – put simply – a good look for a company. It’s an excellent cause for a press release. It’s also a great topic for your next Chamber of Commerce talk. Even more, it can be an attractive new menu item on your website. 

How can employers evaluate the financial wellbeing of their staff?

This can be tricky, for several reasons: 

• Talking about finances is notoriously awkward… especially for Brits! 
• There is an element of apprehension involved in admitting perceived failings to an employer 
• Many people will underplay the role of finances in their mental and physical health – even to themselves 

However, as long as you remember the limitations of self-reported data, you may find success with anonymous surveys. 

Financial wellbeing surveys

A financial wellbeing survey must be totally anonymous to be effective. To that end, we would strongly suggest a digitally-submitted form rather than a paper one, if this is possible. 

Surveys can also be used to get an idea of things like financial literacy among your employees. Financial literacy has strong correlations with financial wellness. 

The questions to ask will depend on your staff demographics, as well as the goals behind your eventual financial wellness strategy. Crafting meaningful evaluation questions can be tricky hence, we recommend checking out the NPC’s guide to proportionate evaluation. 

How can employers improve financial wellbeing for their employees?

The Employer’s Guide to Financial Wellbeing found that 77% of employees trust their employer. That’s encouraging. It means that employers are well-placed to turn things around within their workplaces, as you are likely to be seen as a good source of advice and recommendations.

Building a financial wellbeing strategy is a superb idea for almost every workplace. 

For example, a step that every business can take is making free resources easily available to your employees via a shared hub (we have listed some free tools and resources under Courses & Resources, below). 

A fuller financial wellbeing strategy is not always as high-effort (or high-cost) as you would imagine. Some ideas include: 

• Invite an expert – such as an accountant, pension adviser, or representative from a debt advice charity – to give a talk at the workplace (or a local, easily-accessible venue if this is more practical). Seminar subjects could include: 
• Budgeting skills 
• Debt management 
• Longer-term financial plans 
• Engage counselling services via an Employee Assistance Programme 
• Look into group insurance (life insurance, income protection insurance, etc.) for your employees 
• Proactively explain things like automatic enrolment in pensions, maybe offering additional information about more “complete” pension plans 
• Consider offering low-cost loans to employees 
• Partner up with firm dedicated to providing financial wellbeing (e.g. Wollit) that can offer your staff products like income smoothing, which guarantees a minimum monthly income for your employees, even if they have irregular hours 

If you don’t already have one, a group chat channel like Whatsapp can be useful to keep employees updated of any help you’re offering or recommending. 

The cost of unpredictable incomes

As we mentioned above, irregular working patterns and zero-hour contracts have plenty of upside. But they can also seriously damage financial wellbeing, as unpredictable pay packets invariably lead to financial instability. This dilemma was part of the reason payday loans firms got a foothold in the UK market. These astronomically high-interest lenders took advantage of low-income and irregular-hours workers who found themselves short on cash for household expenses and other essential commitments. As a result, many workers ended up in debt spirals with catastrophic consequences.

The Wollit Income Promise

One way employers are safeguarding against similar occurrences within their workforce is by working with Wollit to deliver Income Promises to their staff. A Wollit Income Promise looks at monthly payslips to calculate a minimum amount of money we can promise a person each month. On months they earn less than average, we top them up with an interest-free cash boost.(with a no-interest loan). On months they earn more than average, they pay us back. Importantly, paying back top-ups is never done if it takes the person below their monthly minimum earnings. 

This system means that employees on irregular monthly hours can plan ahead with things like bills, subscriptions and even rent and mortgage payments. They can, quite simply, be sure of having money in the bank – which is, as we touched on earlier, a luxury that is easy to ignore once you’ve got it and impossible to stop thinking about if you don’t. 

A Wollit Income Promise increases financial well-being instantly by introducing a ‘safety net’ for months when they would otherwise be panicking. This peace of mind is invaluable. 

If you think Wollit’s Income Promise would be beneficial for your staff, talk to us today and we’ll explain how it can work on a company-wide level. 

Courses & resources

Financial advice – other than very generalised guidance – is not something most employers can directly offer their employees.

Some firms will be able to cover the cost of a regulated financial adviser for their employees (for example, you can offer up to £500 of pension advice per year and get tax and NI contribution relief). 

If this is not possible, it can also help to let your staff know there isfree guidance available elsewhere, and where to seek it. This is especially important in the case of debt and financial crisis help.

For longer-term financial advice, helping to connect employees with regulated advisers can also be beneficial. You may have your own local recommendations, or you can use guides like the Money Advice Service’s and the Financial Conduct Authority’s register. 

Free financial guidance resources

• Citizens Advice
• StepChange Debt Charity
• National Debtline
• Christians Against Poverty
• The Pensions Advisory Service
• Pensionwise
• Shelter (for housing advice) 

Budget help

Making a budget is the first step towards financial wellbeing. Simply knowing the best way to identify and list expenses is invaluable. For example, a basic budgeting seminar or class is a fantastic addition to a financial wellbeing strategy. You can also add free budgeting tools to your financial wellbeing hub:

Budgeting resources

• Budget Planner - Money Advice Service 
• Budgeting tool - Citizens Advice 

Financial planning help

The FinCap survey found that only 53% of UK employees have a plan for the next five years’ financial goals.

Having a plan in place is a great help for a person’s financial wellbeing, as it fosters a sense of confidence and control. It can also help pay down debt, which is a big source of financial stress. 

A lesson/course on long-term financial planning could also be a good team-building exercise, as it’s a subject that naturally encourages questions and advice exchange.

Financial planning resources

• How to Prioritise Debts - Money Advice Service 
• Making an Investment Plan - Money Advice Service 
• Plan your retirement income - GOV.UK 
• Financial Plan explanation - Investopedia 
• Annual Financial Planning Checklist - Investopedia 

In summary

There are some core characteristics of any good financial wellbeing scheme. The strategy you construct should be:

• Accessible Make sure all employees know about, and can attend/access, any benefits you provide. Keep approachable two-way communication open. 
• Comprehensive Look beyond the ordinary employer/employee financial communication (pensions, cycle-to-work incentives etc.) and bring in outside influences and partners.
• Flexible Bear in mind that you will not have thought of everything – and be open to possible tweaks and improvements suggested by employees and other sources of feedback. 
• Relevant Every workplace has a unique makeup of demographic and individual circumstance. The needs of law firm staff are likely to differ from the needs of a hospitality workforce. Take your employees into account when constructing a financial wellbeing strategy. Also stay aware of local changes that could impact financial wellbeing (e.g. a sharp increase in living costs in your area or reduced public transport).

Easy, ethical financial wellbeing

We at Wollit wrote this article because we’re serious about improving financial wellbeing in the UK workplace. We’ve developed an easy, accessible, ethical model that has an instant and sustainable effect on financial stability. We’d love to talk to you about how this cutting-edge financial product could work within your business to benefit both you and your employees