Charles Cotton, Senior Policy Adviser, Performance and Reward
As data reported in my previous blog posts and in the latest CIPD Reward Management survey show, indicators of in-work poverty have increased since the start of the pandemic.
This should be cause for concern for employers on two levels: the first concern should be for the wellbeing of the individuals concerned, but CIPD research also shows that money worries can affect employee performance. We found that one in four employees reported that financial anxieties had impacted their ability to do their jobs, due to factors such as tiredness, because of lack of sleep, or being unable to concentrate at work. This data was collected in 2017, and with more recent research showing that financial security has got worse since the pandemic.
The economic impacts of the pandemic and people’s personal circumstances may seem out of an employer’s control, but as income providers, they can and should play their part in supporting financial wellbeing. This benefits the organisation, such as through greater productivity and innovation, as well employees and their families, through greater financial security.
Can employers take full responsibility for their workforce’s financial wellbeing?
Before talking about how reward and people professionals can improve workplace financial wellbeing, I should acknowledge at the outset that they and their employers can’t do this all on their own. For instance, workers need to take some personal responsibility for how they spend, save and invest their pay packets. Governments need to keep a lid on the costs of living as well as regulating employment practices and financial products to ensure that individuals are protected. The financial services industry also has a role, for instance it needs to offer products that deliver value for money, or use less jargon when communicating to people.
In other words, the impact of employers increasing pay and benefits will be diminished if employees make uniformed financial choices, or if living costs rise faster than average pay, or financial products are incomprehensible to the typical worker.
That said, large employers do have some power to sway the behaviours of these stakeholders. For instance, they can use the to nudge workers into making good financial decisions; they can use their purchasing power to incite employee benefits providers to up their offering; and they can try to influence the Government when it comes to living costs, such as the provision of affordable housing, transport or childcare.
An employee wellbeing strategy that doesn’t address financial wellness will have limited success
However, it’s in the workplace that reward and people professionals can have the largest impact when it comes to fostering good employee financial wellbeing. The first step is to recognise that while in-work poverty is a risk both for employees and their employers, good workplace financial wellness is a benefit for both these parties.
The next step for HR teams is to follow up on this awareness. Ideally, we should help create a workplace financial wellbeing strategy, policy and dedicated budget or, at the very least, a policy. In terms of strategy, employee financial wellbeing doesn’t exist in isolation from the ways in which people are managed, developed and rewarded.
For instance, concentrating on employee wellbeing without addressing financial wellness will have limited impact. To effectively tackle stress, employee wellbeing programmes need to address employee financial wellbeing too.
Meaningful work and fair pay are important ingredients for financial wellness and increased productivity
Another aspect of workplace financial wellbeing is having meaningful work and fair pay. Regarding the former, this arises when we look at ways to sustainably boost employee productivity, by reviewing the existing business, employment, and organisational models. In terms of the organisation model, this involves assessing how the firm is designed as well as how work and jobs are designed and organised.
One potential consequence of the changes these reviews could bring is that increased productivity allows an employer to find the money to improve pay levels and the benefit package. Another is that work itself becomes something that people find more meaningful and worthwhile, which should help boost their performance and commitment.
In terms of fairness, this includes being open and transparent with employees about the pay and benefits on offer, why they’re provided, and what employees need to do to qualify for them. For instance, when it comes to pay, this could include giving information on how the grading system works, pay increases are decided, and jobs valued.as
It could also involve providing details on what the organisation means by fairness, both in terms of what the employee can expect from the employer but also what it expects in return from its employees. In addition to ensuring reward processes are fair, HR teams should also review the outcomes of these processes, such as by analysing pay by gender, ethnicity, etc.
It’s time to break the stigma around talking about money worries in the workplace
Another important part of a strategy is getting senior managers to show their commitment to improving employee financial wellbeing by discussing on a regular basis the financial health of employees. Leaders should also support workplace financial wellbeing, such as promoting new initiatives to employees, talking about the financial situation facing the organisation, and encouraging people to be open about their money worries.
There are more ideas for HR and reward professional to help reduce in-work poverty and promote workplace financial wellbeing in the CIPD
The danger is that if employers don’t act, then the financial consequences of the pandemic and the economic lockdowns will increase levels of in-work poverty. However, by recognising that there are steps they can take, reward and people professionals can help their workplaces minimise that risk, and increase the levels of financial wellbeing to the benefit of employees and the organisation.
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