Financial wellbeing in the workplace – why we need to be doing more

Guest blog by Paul Barrett, Head of Wellbeing, Bank Workers Charity

In June last year, I was shocked to read that 31% of middle class people couldn’t find £500 if they were faced with an unexpected expenditure. This startling figure shatters any misconception that financial difficulties are confined to the less well off. It made me appreciate for the first time the true scale of the financial problems facing large numbers of people in the UK.

One pay day away from meltdown

The reality is that in Britain today, a significant proportion of the population is living on the brink, one pay day away from a financial meltdown. Four in ten UK adults have no more than £500 in savings, whilst the Office of National Statistics suggests that 16.5 million people of working age have no savings at all. Many have little in the way of a safety net, meaning an unexpected turn of events, like a redundancy or a serious illness, could tip a huge number of families into crisis. So perilous are people’s finances that even a 2% hike in interest rates could be enough to push many over the edge.

What has led us to this? One thing is the economic turn of events since the financial crash. Wages have been virtually static for the best part of 10 years whilst the cost of life’s essentials has soared. Childcare costs have risen by around a third over the five years leading to 2015, with parents now paying an average of £6,000 a year. Rents rose by an average of 10% in 2015 alone, increasing by up to 18% in some parts of the country.

Poor financial literacy plays a role too. A study by the Financial Services Authority Financial Literacy in the UK found low levels of financial education throughout the UK ‘result in ‘a failure to understand risk, to plan ahead, to save for a “rainy day”, or to compare financial products before buying’. Other research found that people with poor financial literacy were more likely to undertake transactions that resulted in higher fees and charges.

The simple fact is, poor financial literacy exacerbates economic inequality. And sadly things are unlikely to improve in the near future. Post-Brexit economic predictions offer scant comfort, with little in the way of wage growth expected for a substantial period, whilst inflation seems certain to rise.

Money worries and what they mean for employers

Money problems adversely impact on people’s wellbeing in a whole host of ways. At the Bank Workers Charity (BWC), through our work with members of the banking community, we see on a daily basis the damage financial problems cause to people’s lives. We see it affecting their mental health, their personal relationships, in some cases their physical health and even their social wellbeing. Barclays research found that 46% of employees were worrying, and one in five losing sleep, because of money worries, Other research found that 42% of those seeking help with debt are on medication to help them cope with the psychological consequences.

Serious though the impact is on individuals, there is a knock-on effect for organisations . Study after study has found that employees’ financial problems are costly for businesses too. Financial problems don’t go away just because someone comes to work. A US report suggested that employees experiencing financial stress spent 13% of their working day dealing with their money problems. In the UK, Barclays found poor financial wellbeing among employees reduced productivity by 4%, whilst the cost to UK businesses overall is estimated to be £120 billion a year.

Yet most employers aren’t addressing the issue. Research from Close Brothers found that only 32% of companies were providing financial education to all employees One of the reasons for this may be what amounts to a conspiracy of silence around financial wellbeing. Many employees feel uncomfortable talking about financial issues at work, particularly if they’re struggling, so employers can be inclined to view them as a purely private matter. However, there are signs that things are changing. Recent studies have found that employees want to see organisations do more around financial education. Indeed, in one survey 87% indicated that they want their employer to help with financial literacy. If it wasn’t there before, the appetite is unquestionably there now.

Among businesses that are tackling the issue, some stand out. Barclays and Anglian Water both have a comprehensive set of financial wellbeing programmes in place that seek to both improve levels of financial literacy and provide support when employees’ finances are out of kilter. And what is different about these approaches is that they’re not only seen as part of the employees' benefits package but as a key component in the organisations’ overall wellbeing strategy.

There is a real convergence of interest here. Employees would gain significantly if UK companies did more to address financial wellbeing, and all the evidence suggests that businesses would too. And with an uncertain economic future and pensions freedoms complicating matters further, financial wellbeing issues are only going to become more pressing. There is a great opportunity here for UK businesses to make a real difference if they act now and it would be to everyone’s advantage.

Read more about how and why businesses should play a role in improving financial literacy among their workforce in BWC’s whitepaper, Employee financial wellbeing at work: Time to do more

The CIPD has a range of resources and articles on financial well-being.

Attend our CIPD breakfast event Employee Financial Well-being: ‘nice to have’ or ‘must have’ for business? on 31 January to launch new CIPD research on financial well-being.

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