In August last year, I wrote an article about how you can support the financial well-being of your employees. Now I want to concentrate on why this matters to employers.
This really fits as part of my current focus on productivity in the workforce. A survey by Metlife UK earlier this year looked at employee financial well-being. 64% of senior managers said that addressing financial well-being will help boost productivity and engagement.
But businesses say they do not understand enough about the link between financial well-being, mental health and productivity. They want more clarity on how to tackle this issue.
What is financial well-being and why does it affect people who are working?
In simple terms, employee financial well-being can be slotted into various categories. Firstly we need to have an adequate salary to support ourselves and our families. We need to be able to save for the future, in terms of things like mortgages or pension provision. It is good to have a cushion to deal with emergencies. And we want to be able to pay off existing debt. These are key aspects of our financial well-being. Understanding our finances and feeling in control is important. And we want to feel that we are paid fairly for what we do and in comparison to others. It is linked to a belief about whether we are valued properly.
This is not just about pay (or low pay). It is not about financial mismanagement. And it is definitely not limited to a need for debt counselling. Just because people are in employment, it does not mean they don’t have money worries. And the worry is not confined to those on low pay. Financial well-being can be a concern for all income groups, even those with a higher income or in a senior role. In fact, it can have a greater impact when we earn more. The more we earn, the higher our financial commitments.
How does employee financial well-being impact the workplace?
The CIPD, in association with Close Brothers, carried out a study on employee financial well-being. This shows that a quarter of employees say that financial concerns impact their performance at work. The issues include loss of sleep. And time spent at work thinking about or dealing with financial problems. It affects our productivity, our ability to do the job. There can be an impact on ourconcentration and decision-making. Additionally, nearly a third of people in the UK only have savings to cover up to three months if we lost our jobs.
There is a great deal of coverage in the press and social media about mental health and well-being in the workplace. But many employers fail to grasp that employee financial well-being contributes hugely to employee mental health. The CIPD has found that only a third of employers actively promote employee financial well-being. This is largely because employers do not know where to start or how to work out what is needed .
Practical steps for employers
Larger employers are more likely to provide benefits packages. These may comprise a number of different benefits for employees. Smaller businesses will offer a pension. But they may not be in a position to offer a wider range of benefits.
Employers are well-advised to inform and educate employees about the options and what they mean. This is the case however simple or limited the benefit package may be. Have you thought about consulting with employees to find out what is effective (or not)? Are you confident they are making the right choices? This is even more important if you offer a variety of benefits. Especially if people can choose which benefits to take.
There are many low cost or cost-free advice services which employers can provide. Additionally, there may well be some local companies who would be glad to come into your workplace to advise and help your employees. This may be at no cost to you, as the employer.
As employers, we have a duty of care towards our employees. So we need to be aware of people who are working longer hours, not taking all their holidays. Or those who are having unexplained sickness or are behaving uncharacteristically. These could all be signs of problems. And those problems could have financial difficulty as the root cause. We have no right (or desire) to pry into people’s personal finances, of course. But advice on where to seek help may be all that is needed.
What are the benefits for the employer?
How can you help your employees to understand their finances and to become more able to control them? If you can do this, you will benefit from a happier and more engaged workforce. The immediate benefit is higher productivity. If people are getting a good night’s sleep and are able to concentrate at work, then they will be more effective, quicker and more accurate at work.
As an employer, you will benefit from the fact that people will have more trust in you. They know that you pay fairly, that you care about their welfare, that you support them through any difficulties. This translates into better customer service, improved employer reputation, increased loyalty. All of this improves business growth. Why would any employer not want to see those benefits?