Help your employees build a financially resilient future

The Financial Conduct Authority (FCA) have found that about 7.8 million people are struggling to keep up with their bills, an increase of about 2.5 million people since 2020. It’s no surprise that almost one in two people are feeling overwhelmed and uncertain about the future, with 58% of the under-34s taking time off due to financial worries. With this potentially costing UK employers £2.5bn a year, it’s important to find a solution to address the financial instability felt by many.

You, as an employer, can play a pivotal role in fostering financial resilience in your workforce, which will ultimately benefit you in the long term. A financial wellbeing policy in the workplace can help improve workers’ physical and mental health, reduce their stress levels, increase productivity, and reduce sick days. And with 65% of people looking for a good financial wellbeing policy when considering their next employer, you’ll stand out in the job market when attracting new talent.

Think holistically

Surprisingly, financial wellbeing is still the least common area included in HR wellbeing strategies, even though there has been an increased spotlight on the topic in recent times. So it would be easy to say ‘focus on financial wellbeing’ and be done with it. But what would be more useful is to think about more holistic topics that could be explored with employees, to provide well-rounded support in the short, medium and long term.

Financial education has only been mandatory in schools since 2014, so it’s likely that some employees have never had formal guidance, even on the basics. It’s important to start with short-term strategies to develop good money habits. Offering employees guidance on creating – and sticking to – a budget is the first step to becoming more financially resilient.

As part of that budget, factoring in saving for an emergency fund can help protect against income shocks like job losses, or spending shocks like boiler repairs. Being organised with the money coming in each month builds a good foundation for employees to start feeling more financially confident.

Bridging the gap

It’s then good to think about medium-term stability. Debt management tools can be useful in supporting employees to feel in control of any money they owe, as well as highlighting what to look out for when borrowing is the only option.

With 51% of Brits unable to live off their savings for more than a month, encouraging the use of savings accounts will help to bridge the gap between immediate spending and saving for retirement.

Payroll savings vehicles are being used more often by employers. There are a number of workplace saving schemes on the market, but some commonly offered are: ISAs, Save As You Earn, or Share Incentive Plans. With savings coming straight into your employees’ nominated accounts via payroll, this option can make it easier for them to save what they need.

Payroll savings make it easier for people to pay themselves first. Automation removes both the conscious decision and manual effort needed each paycheque. The ‘set it and forget it’ approach means people are more likely to form sticky habits, which will provide a boost to their savings and in turn, financial resilience.

Clare Stinton, Workplace Financial Wellbeing Analyst, Hargreaves Lansdown

Offering education on investments will also be beneficial. Once people have stashed enough cash for a rainy day, investing can provide an opportunity to grow their wealth over the long term. Of course, investments can go up and down in value, so people could get back less than they invest. But in understanding their risk appetite and making informed decisions, employees have – with the power of compounding – the potential to build on their savings, improving their confidence and resilience.

Saving for the future

Because you can’t normally access your pension until you’re 55 (57 from 2028), it’s easy to think a pension is something that can wait until later. But according to our research, less than 40% of people are on track for a moderate retirement that’s in line with the Pension and Lifetime Savings Association’s (PLSA) income targets. This is £23,300 a year for a single person living outside of London. So planning ahead is vital for employees to be financially resilient in the long term. Providing informative sessions on topics like how a pension works, the benefits of increasing contributions and pension tax allowances will encourage employees to think more actively about life after retirement.

The reality is that people have very little confidence when it comes to knowing how much they might need in later life. In a recent survey*, we found that only 12% of people strongly agreed to having a clear idea of how much income they’ll need.

To help, you can guide them towards useful pension calculator tools, or content like the Pension and Lifetime Savings Association’s living standards and the Five to Thrive initiative. This will help to raise awareness about how important financial resilience is in later life.

If you don’t have in-house expertise to cover these topics, this might all sound a bit out of reach. But you can work with external providers to deliver sessions, and it’s a good idea to opt for one that provides bespoke information and resources for your workforce. We have a team of Financial Wellbeing Specialists who provide tailored presentations and 1-2-1 meetings to our pension members.

More on our Financial Wellbeing programme

Financial wellbeing isn’t a quick fix, but through your ongoing support, you can build a more financially confident, content and resilient workforce, ultimately benefitting you as an employer.

This article is not personal advice. If you are unsure of a course of action, please ask about advice.

*(Opinium Survey May 2023, 1563 respondents)

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