Employee financial wellbeing

While there are multiple strands to the concept of financial wellbeing, which are discussed in detail in the CIPD’s Financial wellbeing evidence review, it can be thought of as an employee’s ability to make the most of their money and finances on a day-to-day basis, while also being able to deal with the unexpected, like a bill for a car or household appliance breakdown, and being able to plan and save for the future. The Money and Pensions Service (MaPS) refers to financial wellbeing as feeling secure and in control, alongside being financially resilient, confident and empowered.

A useful framework is produced by MaPS in its UK Strategy for Financial Wellbeing. It suggests financial wellbeing is impacted by an individual’s:

• behaviour (for example, managing money, planning ahead, proactively seeking advice)
• mindset (for example, financial confidence, spending control, engagement with money, saving orientation, digital engagement, and so on)
• abilities (for example, financial numeracy, understanding of financial concepts, knowledge of where to access advice)
• connections (for example, access to reputable financial guidance).

Poor financial wellbeing can lead to financial distress – when individuals struggle with their current finances or feel insecure about their financial future - and in-work poverty. As well as being caused by not having enough income to cover expenses, all of the above elements can underpin financial distress.

In-work poverty occurs when a working person’s income, after housing costs, is less than 60% of the national average, and they don’t earn enough to meet the cost of living (calculated using data from the ONS households below average income statistics). It’s an issue that’s been growing since the mid-1990s, and affects people in different ways. 

Driving factors include:  

• Low income, with pay rises failing to keep up with the rising cost of living.  
• Poor job quality and employment practices leading to financial instability, trapping people in low-paid roles. 
• A lack of genuine, two-sided, flexible working practices that enable people to fit their work around their caring responsibilities or health needs. 
• Underemployment (where people work insufficient hours to cover their cost of living).  
• Financial hardship caused by unforeseen setbacks in personal circumstances, such as relationship breakdown, bereavement or illness. 
• The ‘poverty premium’, which traps those on lower incomes in a cycle where they pay more for goods and services. 

Action needs to be taken because financial and related mental health issues are negatively affecting a significant proportion of the workforce, in terms of wellbeing and performance. Employees not only need, but now also expect this support from their employer.

The steps illustrated in Figure 1 are based on a range of evidence from the CIPD evidence review on financial wellbeing, workshops with experts in financial wellbeing and an IES study funded by the MoneyHelper (formerly known as the Money Advice Service) that trialled the original CIPD employee financial wellbeing guidance within two large public sector organisations.

While reward/benefits teams and HR teams are increasingly committed to supporting employee financial wellbeing, greater levels of engagement among the board and senior management level are typically still needed.

Creating a strong business case for support will set the strategic direction for your organisation and cement the understanding and value in supporting employee financial wellbeing among your organisation’s leaders and other key stakeholder groups. 

A persuasive business case for senior management to support their employees’ financial wellbeing should:

• provide a definition of financial wellbeing that all stakeholders understand 
• link to any broader health and wellbeing strategy and the business strategy
• demonstrate understanding of the current and future priorities of leadership, and state the goals, for example, to improve the mental and physical wellbeing of employees, reduce employees’ reported financial stress levels, and enhance the organisation’s brand and reputation
• demonstrate the ethical or corporate social responsibility case for financial wellbeing support and demonstrate how support can reflect organisational values
• benchmark your organisation against what competitors are implementing to support their employees’ financial wellbeing
• highlight the associated costs of engagement
• highlight the well-evidenced risks to the organisation that employee financial distress can bring.

Poor financial wellbeing impacts health in terms of poor psychological wellbeing, higher stress and anxiety levels, and lower levels of good health. There are hefty organisational costs associated with these outcomes in key areas such as productivity, retention, attendance and engagement. These impacts provide a convincing case for a financial wellbeing strategy, especially when financial problems are acute. 

In addition, research also shows that UK employees now expect their employers to offer support, with over half (59%) of employees believing it is important that their current employer has a policy in place to support and improve their financial wellbeing, and more than four in five UK employees stating their employer should now focus as much on financial wellbeing as on mental and physical wellbeing.

While progress has been made in recent years on taking action to support financial wellbeing, there has been less focus on assessing needs and then evaluating effectiveness. Assessing employee needs identifies which employee groups are in most need of support or are most at risk. Rather than making assumptions, it is vital to engage with your employees and proactively identify issues that may affect different employees.

How can I identify an employee who is struggling financially?

Changes in employee behaviours, such as higher absence, lower productivity, presenteeism, lower-quality work, changes in mood, more distraction or less focus and attention to detail, increased overtime working, or delayed retirement plans may all be indicators of financial difficulties. You should ensure HR and people managers know how to spot the physical, psychological and behavioural signs of poor mental health. Normalise conversations about money in the workplace so employees to feel more comfortable about raising their concerns.

Consider the characteristics of your workforce

Poor financial wellbeing can be difficult to identify, and all employees can experience it, not only low-paid, junior or lower-skilled employees. CIPD roundtables held to inform the 2022 Reward management survey cited examples of senior employees getting into financial difficulties due to life events such as illness, bereavement, or divorce/separation. In addition, the risks vary depending on sector, hourly pay and hours worked, geography, age, gender, ethnicity, and disability. Some of the most vulnerable to in-work poverty are: 

• those not working full-time
• single-parent families
• people living in rented accommodation
• families who have a member with a disability
• families with three or more children or households headed by someone from an ethnic minority group. 

Therefore, there can't be a one-size-fits-all approach to supporting employee financial wellbeing, as certain employee groups and people at different life stages may benefit from different types of support. 

Before any support interventions are rolled out, you should determine your workforce’s specific support needs, based on information and data rather than assumptions. 

Consider the characteristics of your workforce and split your employees into groups to better understand their likely financial challenges. Be mindful of any future workforce demographics in any assessment of need, especially if your organisation is embarking on change.

While not all employees will face the same challenges, it is a helpful starting point. Useful segmentation could include: 

• people starting their first job or apprenticeship, whose challenges could include their ability to understand and effectively use personal finance skills, substantial student loans or credit card debt, limited affordable housing and navigating future financial goals
• people dealing with increasing day-to-day financial pressures while balancing the demands and costs of family life, with the need to save more to buy a house or have enough for retirement
• people needing to maximise their retirement fund, potentially with responsibilities for older people, or developing ill health themselves
• socio-demographic factors: some smaller employers may have knowledge of the circumstances of their employees that may place them in higher-risk categories for poor financial wellbeing – for example, lone parents, carers and social housing tenants.

Collate relevant information 

A significant challenge to effectively supporting employee financial wellbeing is having enough information about employees’ financial circumstances to understand their needs.

This lack of data may be partly due to the stigma that remains surrounding money issues and reluctance to disclose information about personal finances (although these reservations appear to be lessening). However, research by the CIPD found that only 20% of UK organisations actually ask their employees about their financial wellbeing at least once a year. In addition, only 10% of employees state that their employer has asked them if they would like support with their financial wellbeing.

A bespoke anonymised employee survey is generally the best tool to determine employees’ financial wellbeing needs and help to identify particular issues that are causing financial distress. See an example of this approach in our NHS West London case study. 

If not enough data is available and a survey isn’t an option, you may be able to use existing sources of employee information to gain insights (ensuring GDPR requirements are met), for example: 

• A simple analysis of your workforce demographic (for example, age, gender, income levels, culture and location) may help to inform the potential nature of any financial worries.
• Publicly available sectoral research may provide relevant industry data.
• Looking at data in your HR system (data on age, salary level, employment status, bonus payouts, use of maternity/paternity/adoption leave) may provide clues for offering timely support to employees.
• The outcomes of equal pay audits, gender or pensions gap analyses may highlight any disadvantaged groups.
• Absence (related to stress or anxiety) data and/or disciplinary case data (related to performance issues, lateness, or even theft/fraud) may indicate poor financial wellbeing or in-work poverty.
• Your payroll department may be able to share information about the nature of employee queries they receive.
• Your employee assistance programme (EAP) provider and existing providers of any financial benefits may be able to provide insights linked to the take-up of relevant support; for example, a low take-up of benefits such as pensions and saving schemes may indicate low levels of financial understanding or inadequate pay levels, and any increase in the take-up of pay advances or hardship loans may indicate financial distress.
• Managers may be able to offer anonymised insights into their experiences with employees related to money issues; however, to preserve the environment of trust, ensure no personal information is shared.
• Similarly, trade unions may have data on the financial wellbeing of their members.
• Existing employee attitude or engagement surveys may also provide some clues about the current state of employee financial wellbeing in areas such as current levels of satisfaction, work-related stress, views on pay and benefits, and quality of management. 

You could also set up focus groups to identify useful services and engage with employee representatives/networks.

Bespoke employee surveys

It is important to ensure employees understand why an employee survey is being conducted and to reiterate that responses will be anonymous and treated confidentially. Collaborating with your internal communications team could help to simplify the messaging. Having a champion at a senior level within the organisation may encourage participation. A summary of the findings should be shared with employees, alongside a commitment to help address any needs identified. These actions will help to foster trust and engagement in the process and create dialogue between managers and employees, opening up the culture to these types of discussions. 

Collecting baseline data before implementing any interventions also enables their impact to be evaluated (Stage 5) and will help determine the return on investment of initiatives.

Map existing support 

In addition to the assessment of employee need, you should assess what is already in place within your workplace to support financial wellbeing. This will help to evaluate the effectiveness of any existing actions, and identify gaps in support, for which there may be employee demand, and areas for improvement. Beyond any existing financial wellbeing initiatives, you may want to include your current rewards and benefits policies in the analysis.

Key considerations to help you assess your need for financial wellbeing support 

Current provision

• What financial wellbeing initiatives do we currently offer employees? For example, pre-retirement and financial literacy classes, discount schemes, payroll savings schemes, debt support and mental health support.
• How well do we communicate these so that the benefits are understood by our different employee groups?
• What elements of the reward package offer the best value for money, and which elements are delivering less value?
• Is there enough choice and flexibility for staff to tailor their reward package to suit their own personal circumstances and financial goals?
• Do we have open communication channels with employees at every level of the organisation to support our wellbeing message?
• Where would employees typically turn internally to look for help if they are in financial difficulty?

Existing data 

• How many requests are we receiving for emergency loans, or earned wage access?
• What feedback do we have from our EAP provider regarding frequency/volume of money queries and problems?
• What are our levels of absenteeism/presenteeism and how do these vary across the main employee groups and levels?

Potential gaps 

• Do we know what our employees think about the current reward package?
• Do our employees think that we are supporting their financial wellbeing? And how well? How does this vary between different categories of employees; for example, younger compared with older workers?
• What do our external stakeholders – investors, customers – expect us to deliver in this area?
• What level of financial knowledge do our employees have?
• How committed are our employees at present and how do engagement levels vary across the main employee groups and levels?

The actions you can take to improve your employees’ financial wellbeing are highly varied and will depend on numerous factors, including: 

• your organisation’s size and sector 
• the profile and needs of your workforce 
• the level of priority and resources available
• your organisation’s existing approach to health and wellbeing.

It is possible that the scale of the challenge identified by your assessment of need will be significant, but it is important to note that, rather than implementing whole-workforce interventions, action can be taken to address the specific needs of a particular employee group. For example, your lowest-paid employees may be a key area for focus. It may not be possible to implement the most obvious solutions to help lowest-paid workers, such as pay rises or one-off cost-of-living bonuses. However, provision of a fair and liveable wage should be a key ambition. You should help employees determine if they are eligible for any additional government support and should ensure that any additional financial benefits offered do not negatively impact anyone claiming such support. 

Other things you can do are:

• signpost employees to financial education sources and alert them to online financial scams
• consider offering benefits that help to stretch pay packets, such as travel season ticket loans, discount shopping vouchers, flexible working opportunities that could reduce commuting costs or help with childcare
• provide occupational sick pay
• offer crisis loans to help cope with unexpected financial shocks
• help with rental deposits. 

Employees should also understand how they can progress within the organisation to increase their earnings potential.

Although not all support needs to cost money, you should confirm the available budget and resources for your financial wellbeing offering ahead of designing your approach, and consider what can be effectively delivered internally and where external providers could be used. You could also trial some interventions ahead of a full rollout and almost certainly model and cost their operation; for example, how many people are likely to use a new service you introduce, how much will that cost, and what will be the value of the resulting benefits?

Table 2 provides some suggestions for actions. These are typically lower-cost and less resource-intensive interventions. 

Whatever your ambitions, be realistic and targeted, using your data to ensure you are creating a financial wellbeing strategy that accurately reflects the needs of your workforce to maximise its impact.

Table 1: Suggested actions to support employee financial wellbeing for organisations just starting out on the journey

Implementation

Ensure you have a robust implementation plan developed at the outset of this stage. You could use the questions below to develop your plan.

Table 3: Example implementation plan development questions

The aims of this final stage are to measure effectiveness and set out how your plan can and should evolve in the future, given that this journey will likely involve a multi-year set of initiatives, requiring a strategic and integrated approach. 

It is essential to evaluate the effectiveness of financial wellbeing activities to understand what’s working, what’s not and why, ensure any investment is generating value and impact, ensure staff want and value the support in place, and build a robust case for continuing and extending the support. 

The effectiveness of financial wellbeing initiatives can be measured through a variety of metrics. The most common measures include: 

• participation rates in programmes – for example, financial literacy or retirement workshops
• take-up of existing or new benefits – for example, pension plan and use of product discounts
• employee engagement levels
• data sourced from external financial wellbeing and EAP providers and staff surveys. 

Obtaining this data allows you to respond to feedback and realign or adjust any initiatives that are not hitting the mark. Even the most successful employers regularly ‘tweak’ their approach to introduce new industry products and enhancements and respond to the take-up and effectiveness of their existing provisions.