Financial well-being: making a difference

By Charles Cotton, CIPD Adviser, Performance and Reward

This week, the CIPD has been supporting the UK’s first financial capability week. The aim of this programme of events is to raise awareness of the importance of financial capability, what it means and the organisations involved in making a difference.

Financial capability is defined as the ability to manage money well – both day-to-day and through life events (such as illness or bereavement) that might upset someone's financial stability.

Some of the findings from a study by the UK’s Money Advisory Service, shows that working age people don't plan ahead. Its survey shows that:

  • 12 million aren’t saving enough for their retirement
  • 27 million don’t have a sufficient savings buffer to allow them to cope with a significant income shock
  • Only half of people with families have any life cover

The research that we are sponsoring the Institute of Employment Studies to carry out on financial well-being shows that financial capability depends on a number of people management practices. For instance, training and development or reward and recognition, as well as the ‘fairness’ behind these decisions and how effectively they are communicated.

The good news is that many employers are already doing some of what’s needed to promote financial well-being, such as paying a ‘living wage’, contributing to a company pension, offering career development, recognising employee achievement and success, or having a voluntary benefit scheme. In most instances, however, these practices were introduced to meet specific employee or business needs rather than as part of a well-being strategy.

The CIPD believes by bringing these practices together within a well-being strategy, aligning it to the needs of the organisation and its employees, and filling in any gaps in the approach that may exist, employers can boost wellness.

There are many drivers for wanting to boost employee financial well-being. One is that it’s simply the right thing to do. Why wouldn’t you want to improve the financial situation of your employees if you could? Another is the potential risk to your employer and customer brands if your organisation is perceived either as being indifferent to the needs of its workers or exploiting their financial circumstances. Finally, there are the benefits of employing a workforce that enjoys good financial well-being, such as productivity and creativity.

Our forthcoming research will illustrate not only the extent of the current problem but why it exists and why it’s only going to get worse, unless we take action now. Fortunately, it will also come up with recommendations for what the various stakeholders (such as employers, employees, government, financial services, etc) can do to boost employee financial well-being, for the benefit of individuals, society, business and the economy.

While financial capability has the potential to improve performance in a sustainable fashion, this will only come about if employers are also able to ensure that their staff have the ability and the opportunity to perform. Ability may mean that they’re given the chance to develop the required knowledge and skills, while opportunity may mean they’re given the appropriate equipment.

Employers big and small can help improve their employees’ financial well-being in a number of ways. It doesn’t even have to be expensive. It just involves you starting to think about what practical steps you can take to help boost capability.

If you would like to find out more about the CIPD’s financial well-being research, please contact my colleague, Emma Vasey, at e.vasey@cipd.co.uk

Thank you for your comments. There may be a short delay in this going live on the blog page as we moderate the comments added to our blogs.

Anonymous