Prepared by Element Communications
By Stephen Holliday, CEO, Level
Of all the trends to unfurl post Covid, elevating the importance of employee financial wellbeing to a mainstream concern is one of the more welcome fall outs.
When job uncertainty began to bite and the furlough scheme began in earnest, we saw with renewed clarity the panicked, reactive cycle that financial stress induces and the toll it can take on our mental health.
Of course, better alternatives to payday loans are available to improve short term cash flow issues, but not everyone is clued up on options that can make their salary stretch further and improve their spending decisions. Social and economic shifts accelerated by the pandemic have turned attention to the role of employers to help address the knowledge gap aided by insight-rich FinTech solutions that can alleviate both short term financial stress and drive informed choices over spending and saving habits longer term.
Some will say it’s long overdue. Given that the core employer/employee relationship is rooted in the transaction of pay, it is ironic that financial wellbeing policies have rarely troubled the agenda in the past. In many ways, embarrassment over flagging up their financial struggle in the workplace has deterred employees from speaking out along with a mutual unease from employers reluctant to confront it. All too often red tape, reactive education and communication have traditionally been the mainstay of advice; long read articles that leave the individual second guessing how it is applicable to their own personal circumstances compounded by the clunky delivery of solutions and guidance hidden on intranet portals reliant on missing passwords for access. None of which was ever going to promote the agenda or encourage take up and engagement.
Fortunately, we are seeing both a shift in mindset with employees more receptive to financial advice from their employers (one in five according to Price Waterhouse Cooper (PwC’s) Employee financial Survey). As such, an overriding message for HR professions is the importance of looking beyond the provision of the usual employee perks of the gym and GP access to recognise the power and opportunity that comes from making better use of employee financial information.
The Power of ‘Salary Link’
Such intervention makes moral and commercial sense. Fundamentally, employers must recognise and take responsibility for the unique role they play in the financial health of their workforce – all because of the ‘salary link’. This almost transactional relationship between employers and their staff positions them at the leading edge of solutions to improve financial health; even more so than banks or established financial services providers. We see this salary link as a superpower, enabling employers to offer the best solutions to their employees’ short-term and long-term financial needs, via a single holistic service such as an app, website or even via SMS.
By linking directly with payroll, these solutions are stronger in terms of speed and usability (for example earned wage access schemes) or in the interest rates they can offer for a payroll savings account. Research has proven this is the most effective tool for enabling a regular savings habit.
Combining this with analysis of the transactional data that Open Banking provides gives employers unprecedented capabilities to finally measure the improvement they make on the financial health of its workforce.
Doug Politi, writing in the Harvard Business Review in the summer of 2020, commented: “Today’s global events are forcing employers to rethink their role in supporting their workers, especially in terms of pay.” This is a real challenge that businesses must strive to meet.
Assessing the Impact of Financial Health Schemes
Insight is the game changer. From the employee’s perspective, data-driven mobile apps that can help them track disposable income, highlight bills and expenses and bring visibility and simplicity to their personal finances can bring tremendous benefits. These apps can also drive the quality of employee/employer communication and encourage subsequent interventions beyond default advise to simply ‘save more’. For example, while most people will know what their monthly take home pay is, how many are clear on what is left once bills and expenses are paid? Knowing this figure can be a reality check and remove the false sense of security that can come with the initial buzz of payday.
As employees become more informed, so does the employer, benefitting from the broader insight into the financial health of their workforce through aggregated, anonymised data. This insight will enable them to better understand their workforce and help in articulating CSR initiatives by understanding what percentage of staff are enrolled in a savings scheme.
It’s the kind of overview that saw PayPal in the tweak its working practices in the United States when an assessment of the financial health of its hourly and entry-level workers found two-thirds were struggling to pay their monthly bills and had just 4% to 6% disposable income after taxes and essential living expenses. The online payment system set a goal to increase employees’ net disposable income (NDI) to 20 % and a year after implementing the policy estimates that the minimum NDI among this section of the workforce will be approximately 16 percent.
This sort of tangible outcome presents a positive narrative to take to the Board and transforms the quality of life of those no longer having to live by paycheck. Only employers can possess the power of the salary link and must use this unique capability to support their workforce.