Why should financial wellbeing should be in your HR strategy?
About Harriet Shepherd: Harriet is a strong believer that employee financial wellbeing should be a core part of an organisation’s HR strategy. She shared her insights with HR directors and managers from some of the UK’s leading organisations at the recent HR Masterclassing Employee Wellbeing workshop. For more information on employee financial wellbeing or to find out about the Financial Education programme, please contact workplaceFE@sjp.co.uk
When you think about money and financial planning, the chances are there will be an emotional element tied to it. Depending on the financial position of employees, that emotion could be excitement and optimism but equally likely is worry, stress and even panic – after all we don’t all have it worked out all of the time.
As an employer it makes sense to understand how external events can sometimes work against employees and learn how to best support them. After all, any successful company will say that its employees are its greatest asset. It’s sound advice that the greatest investment you can make is in your people.
There’s one area in which investing in employees simply makes sense, both for them and for your company: their wellbeing.
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The business impact of poor employee wellbeing
At any given time, employers can expect that at least some employees will be affected by stress and mental-health issues that undermine their ability to perform. This is because most employees will spend the majority of their waking lives at work. It’s therefore impossible for the stress that they experience in their personal lives not to seep into their working lives too. It’s estimated that the problem could cost the UK economy more than £4 billion every year1.
There is an inherent link between productivity and employee wellbeing. Morale and productivity declines when an employee is dealing with a lot of stress as it has such a huge effect on time and brainpower. It’s impossible to ring-fence time outside the working day to mentally deal with financial problems. Whether or not they are using parts of the day to deal with these types of issues, it will have a detrimental impact on their ability to focus.
Simply put, financial worries don’t go away just because you’re at work. While it’s important to be mindful and understanding of this, it’s also important to realise the impact it can have on your business. That’s why it’s within everyone’s interests for these instances to be reduced and for people to feel supported.
Instilling good financial wellbeing is positive for the bottom line. It also forms one of the aspects of a company’s environmental, social and governance (ESG) considerations. The ‘S’ component of ESG covers the relationships that companies have with employees, customers, suppliers and the wider community.
The COVID-19 pandemic also put employee wellbeing higher up the list of issues that investors look at in companies from an ESG perspective2. This means that employee wellbeing is no longer just an internal issue. Companies need to be able to show what they're doing to support employee wellbeing as they are being held more to account than ever before.
What is financial wellbeing?
A study in 2019 found that 94% of UK employees had money worries, with three-quarters reporting that those concerns affected their work. Almost nine in 10 larger UK businesses say they have been impacted by poor employee financial wellbeing, through outcomes such as reduced productivity, loss of talent and more short-term and long-term absences3.
Financial worries can affect anyone at any time. The Money and Pensions Service explains that financial wellbeing is not just about how much money you have, but also about how secure, confident and empowered you feel financially. Enhancing financial wellbeing is therefore vital to any company that is committed to supporting the mental health of employees.
But what support can a company provide an employee? It’s partly about emotional support, but there is a practical element as well – especially when it comes to building financial confidence and wellbeing.
In some cases, it begins with financial education and equipping people with the tools to manage their finances effectively. This is where a financial advice organisation that can offer financial education is helpful – improving day-to-day confidence and resilience as well as addressing the future and what’s worrying them.
The peace of mind a financial expert brings
Financial education is also about the effective communication of existing reward packages and making sure that there is a good uptake from employees. Employees often need support when making decisions about those opportunities. You only need to look at the number of people still in the default fund of their pension plan. While it will be right for some, more often it indicates that they haven’t engaged with their pension or even their wider benefits package to understand what would work best for them.
Letting them know what rewards are available is one thing, but it’s also important to translate what the different arrangements can mean for them and their lifestyle. A financial expert can add a lot of value here.
Financial education is about equipping people with the knowledge to make informed choices and giving them the information they need to feel more confident. If someone is supporting you and talking you through the financial implications – that peace of mind is reassuring. You worry less when you have someone in your corner.
The Workplace Financial Education Programme at St. James’s Place supports the National Wellness Conversation, which works with organisations to encourage employees to talk more openly about their finances.
1 Employee wellbeing: the changing dynamics of financial health, LCP, 2021 (Based on a survey sample size of 10,000)
2 Workplace wellness and employee mental health – an emerging investor priority, Harvard Law School Forum on Corporate Governance, December 2020
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