The Financial Wellbeing Research 2022*, with responses from nearly 300 companies representing around 1 million employees, found that cost of living concerns are dominating the risks to the workforce’s financial wellbeing.
Employers cite rising energy prices as the number one risk to the financial wellbeing of their staff (91%), with other cost of living concerns, such as rising consumer inflation (81%), rising rent costs (63%), wages not being high enough to cover the cost of living (50%), and high household debt levels (49%) also factors. In addition, given recent interest rate hikes, many will now also be concerned about mortgage costs as interest rates could head even higher.
Despite this, a sizeable majority of employers rate their ability to help employees build a financial safety net (63%) and manage debt (66%) as poor. Only 6% believe their organisation is very good at supporting budgeting and money management. All areas that are likely to become more prevalent because of the current cost of living crisis.
As the crisis deepens, boards have been forced to become more aware of the importance of financial wellbeing. This is highlighted in Aviva’s 2022 Working Lives report which finds that boards are more concerned about the soaring cost of living (35%) than staying ahead of competitors (25%) and the fallout of Brexit (17%) in terms of priorities.
However, with only one in 20 employers having put a mature financial wellbeing strategy in place, the focus on financial wellbeing is in its infancy and lags behind other wellbeing pillars such as physical and mental health, despite all three being very closely linked.
Workplaces also recognise that poor financial literacy is a key financial wellbeing risk (59%), with almost half (47%) believing that improving financial wellbeing for the majority of the workforce is a challenge. On a positive note, 70% say increasing financial capability is a priority in the next two years.
Jonathan Watts-Lay, Director, WEALTH at work, a leading financial wellbeing and retirement specialist, comments;
“As the cost of living crisis deepens, many employers will need to re-think their approach if they are to provide genuine support and solutions for improving employee wellbeing. Supporting employees with day-to-day needs should be the immediate focus, as well as providing support around long-term needs such as savings and pensions.”
He adds; “Key to this is offering financial education and guidance through coaching to help employees understand their finances including ways to manage a budget, save money, manage debt, boost savings and prepare for retirement, as well as why it is so important not to opt-out of a workplace pension.”
Watts-Lay explains; “The workplace benefits should be carefully considered as they can be a great source of support. For example this could include; offering employee discount schemes (on transport deals, meals or tech purchases etc.), introducing salary sacrifice schemes (covering cars, bikes, gym memberships or mobile phones etc.), offering workplace savings and investment accounts (including workplace ISAs etc.) as well as helping people understand the benefits of the company pension scheme and any other benefits introduced.”
He adds; “For those struggling with their finances, there are many support services available to sign post employees to including MoneyHelper’s budget planner. Charities such as StepChange and National Debtline can help people manage debt problems and Citizens Advice can help people to work out what benefits or grants they may be eligible for. Proactive employers are actively working to remove the stigma of debt and encourage their employees to not suffer in silence and access the support available.”
Watts-Lay comments; “To help with all of this, many leading employers are now integrating holistic and proactive financial wellbeing programmes that really make a difference to support employees with building their financial resilience for now and the future.”
Debi O’Donovan, Director, Reward & Employee Benefits Association, comments; “The UK’s cost of living crisis is causing greater focus on financial wellbeing in the workplace. While most employers are clear that responsibility for finances lies with individual employees and not the employer, healthy or poor financial wellbeing across a workforce can affect an organisation’s success and sustainability. Therefore, it’s time to rethink financial wellbeing.”
She adds; “Employee wellbeing got us through the Covid-19 pandemic, financial wellbeing strategies will get us through the cost of living crisis and beyond.”
*The research cited from The REBA/WEALTH at work Employee Financial Wellbeing Survey 2022