Author, Mark Pemberthy, Head of DC & Wealth at Buck
The Covid-19 pandemic continues to have a seismic impact on UK society. By June, 8.9 million workers were covered by the government’s furlough scheme – that’s a quarter of all working adults. As the Government begins to wind down its furlough scheme, many employers across a range of sectors are concerned they may need to make job cuts to cope with lost revenue, including High Street stalwarts such as Marks and Spencer.
With this uncertainty set to continue for the foreseeable future, millions of workers will be worried about what is in store for them, not least because few people have adequate savings to see them through a period of financial stress. In fact, research shows that one in four households wouldn’t be able to cope with a 25% reduction in salary for longer than three months.
Even before Covid-19 struck, the short-term savings picture of Britain already looked bleak. Whilst the introduction of auto-enrolment made sure an additional nine million people were saving for their long-term future, there is still a lack of people regularly putting money aside for shorter-term needs. A 2020 UK study found that 26% of respondents had less than £1,000 in savings.
A 2019 ONS report on earnings and employment revealed that roughly 6.4 million individuals in the UK live on less than £614 per month. For many, this simply isn’t enough to cover bills and necessities, let alone pursue any savings goals they may have. Research by the Institute for Fiscal Studies (IFS) indicated that 40% of people don’t save regularly because they cannot afford to do so.
Financial wellbeing has long been an issue for employees; Covid-19 has merely brought it to the fore. Staff tend to suffer in silence when it comes to their financial concerns, so the impact on the workplace is hard to measure. However, the pandemic has brought this topic into stark focus – and many employers recognise it is time to do something about it.
It’s clear that financial worries were having an impact on employee wellbeing before the Covid-19 pandemic began. Back in March, the Institute for Fiscal Studies looked into attitudes towards savings and found that half of UK adults had not made any savings in the last two years.
Furthermore, a Buck report found that companies have a growing awareness that financial concerns have a drastic impact on their employees’ mental health and overall wellbeing – and if a number of employees are suffering from these issues at the same time, office morale can drop significantly. Helping staff with financial resilience has therefore shot up the order of priorities for many companies, who now want to expand their benefits to include solutions that will enable employees to improve their financial resilience.
Ways to help
The UK Financial Capability Strategy has set out a framework of key elements of financial wellbeing including behaviours, enablers and inhibitors which can provide a useful template for employers wanting to tackle this issue.
Key enablers are financial confidence and engaging with money and there are a number of ways employers can support this. Changing the perception of talking about money is a good place to start; starting a dialogue with employees that makes them feel comfortable expressing any financial concerns will make it easier for them to realise help is available, and also enable employers to point staff in the direction of any financial benefits on offer.
Managing credit use is a key behaviour and providing access to expert advice on debt and budget management by promoting organisations such as the Money Advice Service can also help workers create a plan of action to manage their finances. Additionally, Employee Assistant Plans (EAPs) often include confidential counselling services that aim to help staff tackle their problems head on. Introducing a range of these services can help ensure that every employee will find something that appeals to them.
Tax efficient benefits such as cycle-to-work and retail discount schemes can help employees’ money go further. Additionally, with many offices set to reopen in the next few months, introducing a permanent flexible working scheme could be beneficial for some employees.
Carrying on the option for workers to work from home could give employees emotional as well as financial comfort. After all, flexible working would not only reduce exposure and risk to staff as we ease out of lockdown, but also help them save money in other areas like travel and childcare, especially with the summer holidays upon us.
Short-term savings solutions through payroll, like workplace ISAs, provide employees with a convenient way of diverting any surplus income into a ‘rainy day’ savings fund. As well as the psychological benefit of saving on payday – before the money is spent – this can help build financial resilience for any future financial shocks, or simply help meet other short-term saving goals.
It’s crucial that employers make sure their employees aren’t becoming overwhelmed with financial concerns as the economic impact of Covid-19 takes hold. Employee engagement is key for productivity – and financial wellbeing has a big impact on this.
The good news is that employers have the power to make easy changes that go a long way; creating an open culture when it comes to speaking about finances, enabling behaviours that promote financial wellbeing and making flexible working permanent are just three examples that could alleviate workers’ concerns during these worrying times.