Financial wellbeing. Don’t lose sight of the importance of today

Estimated reading time: 5 minutes

Riaan van Wyk considers the impact of employee financial wellbeing on an organisation’s performance. 

The positive impact of employee happiness and high levels of wellbeing on the workplace is well established by now. Their contribution to the complexities of the productivity puzzle is accepted by many HR practitioners and other business professionals.

The concept of “Wellbeing” has developed from the early days of providing fruit in the office and discounted gym membership, to what we now see as being a more holistic and multi-faceted approach. One of these elements, the financial wellbeing of employees, is such an important and far reaching contributor to overall wellbeing that it is no longer just a nice-to-have offering for employers. It has become essential.

There is a considerable amount of research that supports this and over the last few years we’ve repeatedly come across the same narrative:

  • Those with financial worries have trouble sleeping and they find it difficult to concentrate at work
  • Financial strain can lead to stress, anxiety, or depression and might even manifest in physical illness
  • The above applies in particular to those struggling to manage their debts (at least a quarter of us)
"The problem is that when these findings are so often repeated there’s a danger of us becoming desensitised to them and so they lose their impact and importance. One way of remedying this is to consider the impact of employee financial wellbeing on an organisation’s performance. "

Imagine a direct and sustained assault on 25% of your organisation’s bottom line!

That’s the harsh reality of the situation. A significant percentage of the people who contribute to the success of your business are experiencing financial strain. By extension, this means your business is also taking the strain.

Getting financial wellbeing right is not only an imperative because of its impact on overall wellbeing. It also helps to address other existing employee wellbeing issues such as poor health, relationships, career aspirations and work and life balance.

What’s more, when you take the overall and financial wellbeing of your employees seriously, it creates a culture of shared growth and trust in which the mutual exchange of value between employer and employee will be easier, more transparent and more effective. Employment will become meaningful.

How should an employer approach the provision of financial wellbeing benefits and support to employees?

Firstly, an employer should clearly understand the needs of its employees. There are a number of ways of collecting and interpreting the data needed through people analytics.

Secondly, based on the needs identified, a strategy needs to be developed for delivering and measuring the success of what’s being offered. There also needs to be understanding of how this strategy fits with the overall people and business plans. 

The traditional organisational take on financial wellbeing was to tick a box that says you have a reasonable pension scheme and you have auto-enrolled your people into this. Today, however, there needs to be a provision for addressing the broader aspects of employees’ financial health. This is a considerable shift in focus. 

"Our research has shown that contributing to a pension scheme is only third on the list of financial concerns for employees across all age groups, but behind day-to-day living expenses and the cost of housing. Furthermore, the gap between pension provision and providing for day-to-day living is even more pronounced amongst younger employees. "

It has become clear that, for all ages, financial security is divided into three distinct areas. These are the provision for today, tomorrow and one-day. That is, we all need to have financial security in the short, medium and longer terms. In the past, employers tend to focus mainly on provision for the one-day through pensions, leaving a major void to be filled in the short and medium term.

We can now attribute many of the problems associated with pension scheme members’ inability to adequately contribute towards their retirement fund to the fact that their immediate financial priorities are overwhelming and make it impossible to save. It makes much more sense, therefore, to shift the focus onto support for employees’ current needs, such as day-to-day living, housing and debt management.

Of course, we shouldn’t entirely ignore the importance of pension provision.  But we should realise that in many instances, unless employees have their immediate financial concerns under control and have the ability to save, they won’t be able to prioritise building up a retirement fund.

How does this work in practice?

It is important to realise that there are better ways than offering a one-size-fits-all approach. Offering generic solutions based on assumed needs according to age is unlikely to be effective.  Typical of this scenario are the following assumptions:

  • Younger employees will have day-to-day concerns, possibly student debt and perhaps aspirations to one day buy some property
  • The middle age group will be concerned with starting or supporting their young families, paying the mortgage or (still) saving for that home and possibly managing debt
  • The older age group will mainly have retirement as a concern, holding onto their investments and paying off that mortgage

Sound familiar? Research has shown that all of us, irrespective of where we find ourselves on the “life cycle”, will have certain requirements for today, tomorrow AND one-day. The mix of these needs will depend on our personal circumstances.

These needs should be understood and catered for, not by age or any other member demographic, but by grouping the appropriate solutions based on need and making them easily accessible to all employees. In this way, for example, a financial education session on the very basics of budgeting and managing money might attract attendees in their early twenties AND their late fifties. A considered, structured roll-out of appropriate benefits will ensure that all your employees who have a particular need for a certain intervention get the right opportunity to access it.

Ideally, the same amount of effort we currently put into retirement planning and support (through auto-enrolment, education, prompts to save more, options at retirement etc.) should be applied to wider financial wellbeing.

It is about getting the balance right and not forgetting the importance of today. We must consider the difficulties that employees are dealing with today, together with their concerns around financial provision for tomorrow.