An employee's concerns about money could affect their mental health, productivity and home-life. Employers can make a difference.
As employees’ wellbeing increasingly moves up the corporate agenda, more attention will also be paid to their financial wellbeing.
Financial wellbeing often goes hand-in-hand with mental health. Financial stress costs the UK economy £121bn and 18 million working hours in lost productivity every year, according to The DNA of Financial Wellbeing Summary Report: Health & Care services (opens a new window). A third of employees say that financial worries are their biggest concern.
The financial landscape is changing quickly for many workers, with greater choice and information often resulting in more confusion and stress. There is a clear role for an employer to play in this space – if it understands employee behaviour and can present its ideas and products in a way that really engages employees.
A balance often has to be struck between what a company should and shouldn’t know about their employees’ finances.
Engagement specialist, ‘like minds (opens a new window)’, has found that companies need to start by defining what financial wellbeing means for their workforce and their organisation.
For example, companies need to decide the extent to which they feel comfortable influencing employees’ financial behaviour. Often a balance has to be struck between what a company should/shouldn’t know about their employees’ finances: the more it knows, the more it can help, but such knowledge and input can seem intrusive and raise ethical considerations.
Financial wellbeing should not be confused with how much money a person has: an employee can be financially well off but financially “unwell” (i.e. money causes them anxiety); while another person with far fewer financial resources (and possibly in debt) could be quite content with their financial situation.
The approach developed by ‘like minds’ is based on an individual’s relationship with money and the attitudes, behaviours and values they bring to this relationship.
Financial wellbeing should also not be confused with financial education. While the word ‘education’ can make people feel that they need to reach a level of understanding that could be somewhat intimidating – financial wellbeing is about helping employees to feel better about their money.
What people say, and do
While people care about the long term, their decision-making is often skewed towards short-term needs.
A company must also consider (and in some instances re-evaluate its conception of) what drives people’s behaviour towards money.
While people care about the long term, their decision-making is often skewed towards short-term needs. For example, when we surveyed employees about their financial priorities, the top-two answers were the same every time:
Own a home
Have a comfortable pension/retirement plan.
Yet, when we asked people for their priorities over the next 12 months, the answers were:
Holidays
Debt repayment
Everyday living.
So there’s often a disconnect between what people want, and what they’ll actually do. A company needs to recognise this and decide if it wants to use defaults and benefits plan design to drive long-term savings behaviour, or allow employees to make shorter-term savings decisions.
While the ideal solution might be total flexibility on benefits and education to help people make the best decisions, this is really hard to implement and almost impossible to sustain. There will also be certain benefits (for example, life insurance) that a company might decide should be mandatory irrespective of employee preferences.
Getting the message across
More than half (56%) of HR professionals believe they communicate financial benefits well, according to The DNA of Financial Wellbeing Summary Report: Health & Care services (opens a new window). However, 39% of employees feel their employers don’t communicate about financial support.
Financial wellbeing can be an opportunity to bring together the fragmented approach to communicating benefits and reward.
Often it’s the nature of communication, rather than a lack of it, that is the real stumbling block. The more an employer can talk with employees about money in a language that they understand, the higher engagement is likely to be.
The approach taken by ‘like minds’ is to start the conversation with employees about money with a simple question: "If your money could talk, what would it say about you?"
This question is a good way of getting employees to open up about their finances – a subject that can often cause some defensiveness. It can help discussions about money to become more relaxed and human ("Does your money feel unloved?", "What are its hopes and fears?", "How would it want your relationship to develop over time?"), allowing people to share their financial hopes and fears in a way that feels comfortable.
The form and method of communication can also be vital factors in improving employees’ engagement with specific financial products. Rather than focusing on the features or mechanics of a product, think about why an employee might want or need it. Often this motivation is an emotional one.
For example, ‘like minds’ used a teaser campaign that simply highlighted the number ‘43’. Once employees’ curiosity had been aroused, ‘43’ was revealed as the average age at which people make a critical illness claim. Immediately, people looked at critical illness through the lens of their own age – “I’m 47 and I don’t have this cover, maybe I should?”
Looking ahead
For many employers, financial wellbeing can be an opportunity to bring together the fragmented approach to communicating benefits and reward so that the employee experience is improved.
Financial wellbeing will continue to be a hot topic for the foreseeable future. By placing the emphasis on the wellbeing aspects of this topic as well as the ‘financial’, employers can create a truly employee-centric approach that puts employee concerns and aspirations at the centre of the reward and benefits proposition.
The financial question that employees actually find most stressful is: “Are you and your partner financially compatible?” If a company could help employees to answer and explore this question with fewer feelings of stress, then it really will have made a difference.
For more information, please contact:
Nick Throp
Tel: +44 (0)1926 863000 | Email: nick@likeminds.uk.com (opens a new window)
Paul Waters
Email (opens a new window): Paul.Waters@hymans.co.uk (opens a new window)
Chris Rofe
Tel: + 44 (0)20 7933 2876 | Email: chris.rofe@uk.lockton.com (opens a new window)