When it comes to work, we all want to earn a decent wage, and the sum that hits our bank account at the end of each week or month is obviously important, yet there is so much more to financial wellbeing when it comes to pay and (the often less appreciated) benefits.
What is Financial Wellbeing?
Let’s start with understanding what Financial wellbeing is. The definition from America’s Consumer Financial Protection Bureau describes good financial well being as:
“a state of being wherein you have:
- Control over day-to-day, month-to-month finances
- The capacity to absorb a financial shock
- On track to meet your financial goals
- And have the financial freedom to make choices that allow you to enjoy your life”
This is a combination of security and freedom of choice, both now and in the future.
Financial wellbeing is about being aware of your financial state and managing your finances to meet you basic living needs. This involves budgeting, having a plan and saving for uncertainty
how does it impact other areas of wellbeing?
Organising your home, paying bills and completing paperwork can be stressful.
Financial issues also impact on our relationships, and can be a cause for disagreement and relationship breakdown.
Poor financial wellbeing also compromises social wellbeing as financial constraints prevent us enjoying a full social life.
So developing money management skills and knowing where to get help improves your emotional wellbeing. Nobody likes struggling with money and needing to pay unexpected costs. By developing a budget and financial plan you can improve your emotional wellbeing too.
Why is financial wellbeing an urgent issue?
Even before the pandemic, there were a number of factors building an urgent concern here in the UK:
- There has been over a decade of slow wage growth
- Accommodation costs continue to increase ahead of wages – both mortgage and rental options
- Easy access to credit has encouraged many into serious debt
- Growth of zero-hours contracts has given many employment insecurity
There is also a known link between financial difficulties and mental health that is a viscous cycle.
Why should employers be concerned about financial wellbeing?
Even before COVID, there were lots of employees with financial difficulties. Of course, COVID then made it worse and many people hadn’t recovered from the impact of that financial shock before they were hit again, with the financial cost of living crisis.
With the cost of living and inflation on what seems to be a steep rise in recent months, with little sign of this improving, and uncertain times during the pandemic having many holding off from changing jobs, in what now seems to be a job seekers market, you may think pay is a primary driver. And the evidence will always show it’s a crucial factor (we all need enough to pay our bills) but it’s not as simple as that.
Supporting your current employees
Financial stress can cause us to cut back on the so-called luxuries, that are crucial to our wellbeing. There is also a very strong link between money worries and mental health, with a significant proportion of those seeking help with debt also being prescribed medication to cope.
So what can you do to support your current employees?
- Firstly, pay a fair wage – starting there will help retain and also attract employees and improve your culture and employee loyalty. Get ahead of the competition and evaluate the market rate of pay and how you compare.
- Offer flexibility with working where you can – if agile, hybrid working means fewer days in the office that’s fewer days needing to pay for fuel, parking, lunch, coffees and for many extra hours in childcare.
- Encourage car-sharing – if you still need employees in the workplace, look at ways you can support them to help each other, including sharing info about low-cost parking, or other travel cost savings
- Raise awareness of the benefits you already offer – this may include health cash plans, cycle-to-work schemes, cashback or discount schemes.
- Discuss pensions – and other salary sacrifice schemes that help employees financially plan for both now and in the future
- Provide financial education – consider the varying generations in your workforce and what financial education they may benefit most from
- Signpost to external support and resources – services such as The Money Advice Service (now known as Money Helper) and Citizens Advice have lots of information for a wide range of financial matters, as well as charities such as StepChange that support debt impartially
- Create or promote networks/support groups – personal circumstances change, and we can learn from others who have been through similar. That may be new parents, those facing caring responsibilities, approaching retirement, or living with disabilities – having the support and knowledge of others to tap into can help both emotionally and financially in knowing who to ask and where to look for support.
- Provide an Employee Assistance Programme (EAP) – this confidential service can help with a whole range of personal support, from money to legal, to mental health and wellbeing, oftentimes which are linked.
What is the business cost of financial wellbeing?
Not talking about it will come at a cost – you may lose the resource of valued employees, whether temporarily with sickness absence and reduced productivity, or permanently to a more supportive employer.
It may seem to talk about finances is not the place of an employer, but as with mental health, reducing the stigma by opening up the conversation in some way, offering support, and quietly signposting, you can make positive change.
What positive change will you be making to support the financial wellbeing of your employees?
