In this article, we illustrate how you can help your employees better navigate the challenges posed by the cost of living crisis. There are several efficient, cost-effective ways of improving financial wellbeing and easing financial stress of your employees.
Are you putting financial wellbeing at the heart of your people strategy?
of business are yet to implement formal financial wellbeing programmes1
of employees missed work due to financial worries2
is the estimated cost to private sector businesses from worker days lost due to poor financial wellbeing3
Why financial wellbeing matters to your business
The financial stresses outlined above can have serious negative effects on the performance of your employees. They may not be able to focus on work if they are concerned about meeting mortgage payments or repaying credit card debt.
It’s important to acknowledge that debt is not the only financial issue that your employees are facing. Even without taking out loans, people are experiencing higher costs in almost every part of their lives. Taking a holistic view of financial wellbeing is key.
The Covid-19 pandemic brought about a significant shift in the way businesses and their employees thought about financial wellbeing. As we explored in our recent ‘Rethinking what we need from work’ report, businesses need to embrace the idea of a new contract with employees, what we refer to as the “lifestyle contract”. This describes a change in mindset to focus on sustainable and healthy experiences at work, designed to benefit everyone.
However, our Financial Wellbeing Report also shows that two thirds of organisations have yet to implement formal financial wellbeing programmes. We believe this needs to change.
From a human resources perspective, as an employer you have a duty of care towards your employees. Providing this makes sense financially, too: research suggests that many employees – a third, according to our ‘Rethinking what we need from work’ report – have become more stressed about their finances, with a knock-on negative effect on their ability to fulfil their job.
In 2021, approximately 10% of employees missed work due to financial worries, according to the Centre for Economics and Business Research.4 This suggests roughly 13 million worker days lost due to poor financial wellbeing, at an estimated cost to private sector businesses of all sizes of £2.5 billion.
It’s clear that improving your employees’ ability to manage money well will reap rewards for them and for your business. Happier people will be more productive and more content in their roles – reducing the likelihood of needing to hire new staff, which itself can be expensive for the business.
What can your business do to provide financial education to their employees?
We believe the new, post-pandemic approach to employee benefits and wellbeing should be focused on four core needs: physical, mental, emotional, and financial. Employees will value healthy experiences at work, and will reward businesses with good performance that is sustainable.
For example, healthcare provision can bring employees added security that they will be looked after if they have medical issues, while discounted gym memberships can encourage healthy lifestyles. Healthier and happier employees are more productive and less likely to be absent from work – with all the corporate economic effects this brings.
At Mercer, we have created an engaging workplace education programme focusing on four core pillars of financial wellbeing. It’s designed to support employees with financial education tools, empowering them to take more control of their finances.
The programme blends digital and traditional methods to ensure an inclusive approach for all. From the basics of finance to managing debt and planning for the future, our financial education team will support your people and your business with all the resources you need.
We can also provide face-to-face financial advice to employees, supporting their financial education and referring them to other specialist assistance – such as StepChange for debt management – whenever necessary.
It’s never been easier to support your employees with their financial wellbeing. At a time when everyone is affected by higher costs, they will thank you for it.
How the cost of living crisis could be affecting your employees
High inflation is eroding the purchasing power of employee wages, while approximately a third of UK adults are struggling to afford rent or mortgage payments, according to the Office of National Statistics.5
As the Bank of England tries to dampen the effects of inflation, interest rates are rising. This means additional expenses for many people as the cost of servicing debt increases at the same time as they are paying more for utility bills and at the supermarket.
Outstanding credit card balances rose by almost 8% in the 12 months to the end of 2022, while the average total unsecured debt per adult hit £3,914, according to The Money Charity.6 Total UK personal debt was more than £1.8 trillion at the end of 2022, up by more than £72 billion in 12 months – the equivalent of £1,367 per adult.
Mortgage payments are increasing too, as the Bank of England has raised interest rates from 0.1% to over 4% at the end of Q1 2023.
Mercer’s ‘Rethinking what we need from work’ report highlighted that many employees report having reduced spending due to concerns about inflation, and roughly a quarter have reduced the amount they are saving. A similar proportion have had to tap into savings to meet higher costs.