Common financial pitfalls could be linked to a decline in workplace productivity. So what are challenges and what measures can employers take to support financial wellbeing? Contributor James Herbert, CEO – Hastee Pay.
Employment in the UK recently reached a record high and pay growth has surged, but it’s not all sunshine and roses for the UK’s workers. For many reasons, financial wellbeing deserves space on the HR agenda.
Last year, The Independent newspaper reported that a large percentage of people in Britain feel they are living beyond their means. Further Hastee Pay research shows workers are struggling to balance the incomings with their outgoings with 78% of workers saying they rely on some form of high cost credit to get by between pay days, whether it be a credit card, overdraft or pay day loan.
This startling reliance on costly borrowing could be happening for a number of reasons. We live in a consumer culture that increasingly creates more inventive ways to encourage us to spend, such as targeted ads tracking our online activity and appearing in our social media feeds.
FOMO (Fear of Missing Out) spending is a problem among millennials with 58% admitting to overspending on social situations that they feel they can’t miss. In order to satisfy that fear, many young people turn to high cost credit options, entering themselves into a cycle of debt. FOMO spending is closely linked to ‘present bias theory’ which refers to people placing extra weight on more immediate rewards rather than saving their money for a future investment such as a house deposit.
It’s easy to see how spending can quickly spiral out of control and, despite a recent decline, the cost of living here in the UK is still relatively high. All of this should matter to employers because poor financial wellbeing in the workforce hits the business in the pocket.
The cost of a cash-strapped workforce
According to the Hastee Pay research, over a third of workers (35%) say their finances leave them feeling anxious or stressed most of the time while 24% have difficulty concentrating at work due to financial stress. Employers that can provide some form of financial wellbeing incentive could increase workplace productivity by helping workers to tackle financial stress, removing the distraction. 21% of the workforce admit to managing their repayments during working hours, and that’s not just lower paid workers – the figure rises to 30% for people in higher level roles.
Attendance can also be improved. 32% of workers surveyed said they have been unable to get to work after an unexpected cost. This could be anything from a car or bike repair but could also extend to struggling to afford the cost of their commute.
If these year-round struggles weren’t challenging enough, mid-winter brings bigger problems. In the build up to Christmas and its increased financial demands, 58% of workers have had to cut back on their spending to prepare. But the struggle is exacerbated in the new year. Workers are five times more likely to use high-cost credit in January compared to December, nearly seven times more likely to use their overdrafts and twelve times more likely to use a bank loan. This is most likely because many workers are paid early before Christmas, making the wait until pay day even longer.
Supporting the workforce to manage money responsibly
By implementing a financial wellbeing strategy, employers can instil greater financial responsibility in the workforce and reap the benefits of increased workplace engagement, productivity and retention. There are various measures employers can implement at little or no cost to the business.
Earnings on Demand is a new workplace concept that is free to implement and empowers workers access to a portion of their earned wages to make better financial choices. When a worker is faced with an unexpected expense such as a one-off bill that would send them into the red, they can stay in the black by withdrawing the necessary funds from their earned pay via a smartphone app. There is no impact on company cashflow and minimal disruption to the existing payroll process, just an extra line item on the worker’s payslip reflecting any deductions.
Other wellbeing apps that offer financial advice and offer rewards such as exclusive discounts on meals, cinema tickets, travel and fashion can also be implemented as part of an effective financial wellbeing strategy. But financial guidance could be extended further still by booking in financial guidance sessions with an external consultant that can take place in the workplace on a quarterly or bi-annual basis.
There are also basic recommendations employers can issue to help improve financial education in the workforce. For example, workers should be encouraged to read the T&Cs on legally binding documents and agreements before signing, understand APR, build awareness of monthly outgoings and keep check on areas where they can cut back, such as by switching energy providers or regularly reviewing bank statements to understand their own spending habits.
There’s a myriad of reasons why workers struggle financially and the stresses and strains that come with poor financial wellbeing can clearly impact their working lives. Employers can’t control how workers live their lives but they can influence their behaviour for the better by implementing measures to help them manage their finances. For little to no financial investment, employers can benefit from a stronger, happier and more productive workforce.