CIPD Voice: Issue 34

With inflation reaching levels last seen 30 years ago and pay failing to keep up with inflation, more employees are at risk from poverty. 
Deteriorating financial wellbeing has implications for employees and workplaces. A CIPD report, which reviews the latest academic research on the consequences of poor financial wellbeing, finds that it can have negative consequences for employee mental and physical health, and this then has an impact on their productivity with consequences for organisational performance.
Against this backdrop, this year's reward management survey explores employer attitudes to financial wellbeing and in-work poverty as well as what organisations are doing, and are planning to do, to support the financial wellbeing of their people. In addition, we also asked YouGov to survey over 2,500 employees in January 2022 for their thoughts about financial wellbeing and their opinions on how well their employers are supporting their financial wellbeing.
This year’s CIPD reward management report is supplemented by findings from a survey of over 2,500 employees conducted on our behalf by YouGov in January 2022. One of the angles of research was to assess how employers are supporting the financial wellbeing of their employees and what employees thought about how well this was being done.
The reward management survey finds 18% of organisations have a financial wellbeing policy, either as part of a wider employee health and wellbeing policy (14%) or as a standalone financial wellbeing policy (4%). Another 20% have plans to introduce such a policy this year. Our report also shows that just 26% of those who have a policy back it with a budget, although a further 42% plan to do so by October.
It makes sense for organisations to create, communicate, and invest in a policy because they are then more likely to stand out in the labour market. While 59% of people questioned believe it’s important their current employer has a policy to support and improve their financial wellbeing, 65% also think that having such a policy will be an important factor when they consider their next employer.
A policy can also be beneficial to people, our employee survey finds. For example, in organisations where those questioned say there’s a financial wellbeing policy, 76% of them report that they feel in control of their finances. In employers where they say there’s no policy in place, this proportion falls to 64%.
For employees, other advantages of a policy include:
  • Positive impact – 71% of people working for an employer with a financial wellbeing policy say that their employer has a positive effect on their financial wellbeing; but just 45% of those working for an organisation without a policy also say this.
  • Better sick pay – if they had to take 10 days off ill, 71% of employees at a workplace with a financial wellbeing policy say they would get paid their full wage for this period; while only 50% of those working at one without a policy can say the same.
  • Better pensions – while 64% of those employed by an organisation with a policy say their employer has a generous pension scheme; just 26% of those working for an organisation that doesn’t say the same.
  • Doing enough – 60% of those covered by a policy say their employer is doing enough to support their financial wellbeing; just 28% of those working for an employer without one say the same.
  • Improvements to financial wellbeing – 31% of people at a workplace with a policy report that their financial wellbeing has improved since January 2020; by contrast, just 21% of those working for an employer without one can claim the same.
Those who work for an employer with a financial wellbeing policy are also more likely to: 
  • know what they need to do to get a pay rise (36% versus 16% of those working for an employer without a policy).
  • say that their pay is enough to help them save for retirement (61% versus 41%).
  • be satisfied with their employee benefits package (70% versus 28%), find these benefits quick and easy to access (67% versus 30%), and agree it supports them at different stages of their life (60% versus 19%).
  • agree that their job protects them from poverty (82% versus 66%).
Employees also report that if their employer has a financial wellbeing policy it’s also more likely to try to communicate about the benefits package. Among workers covered by such a policy, just: 
  • 8% say that they’ve never been told what benefits are on offer (compared with 42% of those without a policy).
  • 9% report it’s not been explained to them how these benefits could be useful (compared with 49%).
  • 16% claim that it’s not been communicated why these benefits are provided (compared with 52%).
Most employees covered by a financial wellbeing policy want their next employer to have one too

Employees in a workplace where there’s a policy are also more likely to say that they been asked if they would like support with their financial wellbeing (31%), compared with those working for an employer without one (5%). Similarly, people covered by such a policy are more likely to say their employer followed up on this question and provided financial wellbeing support (68%) than those in workplace without a policy (35%).
Perhaps it’s not surprising then to find those employed by organisations with a financial wellbeing policy are more likely to say it’s important that both their current (81%) and their next (81%) employer has this arrangement. Having a such a policy can help retain or attract talent.
So, who are those covered by a financial wellbeing policy? In total, 20% of employees report being covered by such a policy, but there is a link to income. While 14% of all those employees earning less than £20,000 work for an organisation with a policy, this portion increases the more that employees get paid. Could pay be having an influence?
When asked whether they agreed with the statement My employer offers a generous pension scheme 48% of those receiving less than £20,000 covered by such a policy agreed while 46% of the highest paid earning £70,000 or more not covered by a policy also did. Or, when we asked My employer's benefit package supports me at different stages of my life 42% of those receiving less than £20,000 covered by such a policy agreed with this statement while 41% of the highest paid earning £70,000 or more not covered by a policy also did.
Overall, if you don’t have a policy, then you must effectively pay people £70,000 or more to get a similar result as those earning less than £20,000 covered by a policy. Of course, if you get £70,000 or more and your employer also has a policy then you’re far more likely to agree with such statements that My employer offers a generous pension scheme (79%) or My employer's benefit package supports me at different stages of my life (77%). Similarly, if you earn less than £20,000 and your workplace hasn’t a policy, you’re less likely to agree with these statements (15% and 10% respectively).
HR teams should take the lead and help their employer create a policy

Because a financial wellbeing policy can help both employees and employers, we recommend that HR teams help their employers create a policy by first creating a definition of financial wellbeing. A detailed definition should help management assess what the organisation is already doing, identify where improvements can be made and set the direction of travel. A simpler definition can be used when talking to employees, line mangers, investors, the media, and so on.
Once agreement is reached about the definition, we suggest that people professional help implement it, preferably supported by a budget. We recommend HR teams tailor their financial wellbeing approach, so it reflects the diversity of the workforce, and design it flexibly so that it can meet people’s changing needs.
Because financial wellbeing is closely linked to people’s income, we advise that the financial wellbeing strategy is linked to pay policies that are fair and provide a liveable wage. The policy should also support in-work progression, provide financial education, and offer benefits that cut living costs and give financial help or protection.
We recognise that avoiding stigma and overcoming a natural reluctance to talk about money worries isn’t easy, so we’re recommending HR teams explore ways in which conversations about financial wellbeing can be normalised and to signpost individuals to relevant sources of help. This might also involve supporting line managers to encourage their team to open up if they have money issues, so that they can be directed to appropriate sources of help.
With the cost of living rising and employee stress levels increasing, we believe that having a joined-up approach to financial wellbeing in the workplace will help both employers and their workers.
Charles Cotton

Charles Cotton, Research and Policy Adviser, Performance and Reward

Charles has recently led research into the business case for pensions, how front line managers make and communicate reward decisions, and managing reward risks, as well as the creation of a good practice guide on the annual pay review process. He is also responsible for the CIPD’s public policy work in the area of reward and is a Chartered Fellow of the CIPD.