May 28, 2020

The hidden productivity killer: Why companies should support employee financial wellness

Financial stress is at an all-time high, and it’s taking its toll at work. Designing the right employee financial wellness offerings – and grounding them in workforce data – can help companies reduce turnover, lower absenteeism, and improve productivity.

We’ve all heard the stats on how financially stressed people are today. Even before the COVID-19 pandemic created widespread economic uncertainty across the world, the average UK employee was living payslip to payslip. And it’s not only lower-income earners who are struggling: According to the UK Financial Wellbeing Index in 2019, the vast majority of UK employees are suffering from money worries (94%), with more than three quarters (77%) of employees saying that money worries impact them at work [1].

While employers may dismiss employees’ finances as a personal matter, in reality the stress associated with financial instability impacts business. The Financial Wellbeing Index report above also found that at any one time, two out of five employees (40%) are constantly worried about their finances – distracting them from their work and affecting their productivity [2].

And financial stress isn’t just affecting employees’ health and productivity, it’s also determining how they navigate their career decisions. Finances determine which job offers people can afford to accept, whether or not they can upskill themselves to prepare for the future of work, and when they can retire and open up opportunities for the next generation. All of these factors have a trickle-down effect on an organisation’s ability to attract and retain the best talent, to have the right skills represented, and to get the best work out of their people.

 

 

How financially well – or unwell – is the workforce?

There are a lot of factors that go into being financially well. According to Tom Rath and Jim Harter – workplace well-being researchers at Gallup and authors of Wellbeing: The Five Essential Elements – it’s about “effectively managing your economic life” through healthy spending, emergency preparedness, access to information and tools for decision-making, and future planning [3].

So how does the UK workforce measure up to these standards?

Let’s start with healthy spending. Prior to the onset of the COVID-19 pandemic – which has undoubtedly worsened the financial situation for many – debt was already a serious issue for many UK citizens. According to an Institute for Employment Studies report, the UK has a “spend today, rather than save for tomorrow” culture, which points to serious problems in the future with financial stability [4]. For example, 40% of working-age adults in the UK do not have good control of their money, don’t keep track of spending, don’t have a budget, and can’t easily meet their regular financial commitments. 

The report also found that saving for emergencies and future planning are also significant weak spots. Four in ten UK adults do not have a modest savings buffer of £500 to fall back on and 12 million people are not saving enough for their retirement.

The UK’s financial acumen isn’t particularly strong, either. According to The UK Financial Capability Survey 2018, 48% of young people say that they didn’t receive any meaningful financial education in school, at home or any other setting [5]. Confidence is not high either, as 47% of adults are not comfortable making decisions about financial products and services and 63% do not feel they can determine what happens in their lives when it comes to money.

The impact of employee financial stress

Financial stress has a profound impact on people – the report I referenced earlier by the Institute for Employment Studies, for example, also found a correlation between poor health and a lack of financial wellness [6]. Not only does stress itself harm people’s physical health, concerns about prolonged absence at work can cause employees to avoid seeking treatment for symptoms they’re experiencing and put off routine tests and check-ups that would help prevent more serious illness.

Being financially stressed can also lead to an increased reliance on payday loans, resulting in high fees that can create a never-ending cycle of debt – and stress. According to a report by The Royal Society for Public Health, payday lenders have the most negative impact on mental wellbeing, followed closely by unauthorised overdrafts [7].

Employees’ financial stress can have several negative impacts on the organisations they work for. When the people on your team are unhealthy – mentally and or physically – that translates to higher employer healthcare costs, and an increase in sick days. Absenteeism then affects the rest of the workforce, as other employees work overtime to pick up the slack from absent workers. Lowered productivity due to distraction is another issue, as is increased turnover. And, finally, older workers may delay their retirement due to higher benefits costs or not being financially prepared, which limits the upward mobility of younger workers.

 

 

How can organisations build the right financial wellness program?

The scope of employee financial wellness is broad. Having a generous retirement savings plan doesn’t mean an organisation has financial wellness covered. Supporting financial wellness means offering programs that address the employee’s complete financial picture, from health benefits to retirement planning to debt management.

 

 

Here are three key strategies to help your organisation create a financial wellness program that will truly benefit your workforce – and your business.

1. Let data drive your financial wellness program

The ultimate goal for your organisation’s employee financial wellness program should be to spend your benefits budget on programs that will have a positive – and measurable – impact on your workforce KPIs. To do this well, you’ll need to dive deep into your workforce to understand them as individuals, learning what their pain points are and what’s getting in the way of their financial stability.

If you’re using modern Human Capital Management (HCM) platform that unifies your workforce data from a variety of sources, you can leverage insights from it to drive your employee wellness strategy. By using data sources from core HR systems and benefits providers, you can gauge adoption and usage of the benefits and wellness programs you’re already offering and look for patterns based on employee demographics.

 

 

Employee surveys and benchmark data can help to fill in the gaps with more information, such as the reasons behind an identified pattern. Surveys can also help you to measure the impact of any changes or new programs you introduce on employees’ reported stress and engagement levels to determine what’s working and what isn’t.

2. Expand and personalise your benefits offering

One size fits all typically does not fit the needs of the modern workforce. The next step in your efforts to build a financial wellness program that truly benefits your workforce is to leverage the data-driven insights you’ve uncovered to expand and personalise the benefits and wellness programs you offer based on the actual pain points of employees.

Organisations should look for gaps in the existing benefits and wellness offerings and aim to create a program that has a full range of options for employees to choose the best opportunities to improve their personal financial wellness. Leveraging segment analyses done during the data gathering exercise will also help HR teams guide employee selections and “package” them internally in a way that highlights their benefits to various segments of the workforce.

For example, some common wellness offerings, such as health benefits and pension plans, may be less attractive to younger workers who are currently healthy but saddled by student loan debts, or struggling to save a down payment for a home in an expensive housing market. And working families juggling childcare may value a perk like childcare vouchers or flexible holiday arrangements so that they can organise working around family commitments.   

 

 

3. Conduct training to ensure maximum adoption

The last piece of the puzzle is to build awareness of your organisations’ commitment to financial wellness and encourage adoption, which can be done through training. A flexible learning platform is a key tool to support this endeavour, as it allows for personalisation. People consume information in different forms based on personality, age, and other factors, so offering training through different media, formats, and devices will also help to increase engagement.

Data, analysis, and segmentation do not end when it comes to training and awareness. These tools can be used to understand who is potentially not using programs that they should be, and why. Understanding what the barriers are to adoption – from a lack of awareness to a need for different types of training – can help HR teams address issues quickly.

Final thoughts

Investing in employee financial wellness is a strategy that will benefit employees and organisations alike. For one, improving employees’ financial stability can improve the ROI on labour costs by lessening employees’ financial stress so that they can focus on their work, increasing their productivity and reducing absenteeism. It can also be a powerful tool for recruiting and retaining top talent, as employees are likely to place a high value on opportunities to improve their financial stability, health, and overall wellness. Improving employee financial wellness should be a top priority for organisations navigate through the current crisis to build a stronger, more resilient workforce for the future.


[1] Financial Wellbeing Index 2019, Close Brothers Asset Management, 2019

[2] Financial Wellbeing Index 2019, Close Brothers Asset Management, 2019

[3] Your Spending and Your Financial Well-Being, Gallup, 2010

[4] Supporting Employee Financial Wellbeing, IES Perspectives on HR 2017, March 2017

[5] The UK Financial Capability Survey 2018, Financial Capability Strategy for the UK, 2018

[6] Supporting Employee Financial Wellbeing, IES Perspectives on HR 2017, March 2017

[7] Life on Debt Row, Royal Society for Public Health, March 2018

Patrick Luther

Patrick Luther is Vice President and Principal, Financial Services at Ceridian. He has over 10 years of experience in product management and marketing of enterprise software, and 10+ years in consulting for the financial services sector. Patrick is a former U.S. Navy Lieutenant, and has held leadership roles at IBM, Rational, Infosys, Deloitte, and various SaaS startups. Patrick holds a B.S. in Mechanical Engineering from the University of Rochester and an MBA from Yale.

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