The unequal impact of Covid-19 on women and how to use benefits to rebalance the workplace for the future

Covid-19 is the biggest challenge the UK has faced in decades. The pandemic has had a far-reaching impact on UK households, not only restricting our freedoms but also influencing our use of credit, debt levels, savings and education as well as our general financial resilience.

With the UK furlough scheme kicking the true scale of the fallout down the line, it will be years until we can fully understand and appreciate the true ramifications. However, the first statistics released from the Financial Conduct Authority (FCA) indicate that the pandemic has had a polarising effect on the UK – 38% of adults have seen their finances worsen, compared to 14% reporting they're better off. And a third of people have delved into their savings, whilst a quarter have been able to save more.

Over the last 15 months women have been disproportionately affected by the outcomes of Covid-19. The pandemic has exacerbated existing inequalities that women already face – they typically earn less, are in less secure jobs and as a result typically receive consistently lower pension contributions from their employer.

What does this mean for female financial resilience?

There was a 115% increase in young women making welfare claims between March and November last year. This may be partly explained by the fact that women are three times more likely to be part time workers, who are over-represented in the shutdown industries such as hospitality and retail, most of whom would have experienced a reduction in income or worse, redundancy. So it’s unsurprising that some are referring to this as a ‘shecession.’

Prior to any knowledge of ‘Covid-19’, for many women their economic activity has always been limited by a higher care burden - the virus has intensified that burden. National lockdowns forcing the closure of schools and childcare has isolated some women from the valuable support systems provided by organisations or relatives, that previously enabled them to go to work.

Income has typically decreased, but essential spending has risen due to the costs associated with home schooling including greater food and utility bills. Between February and March last year, working UK mothers experienced a 22% fall in paid work hours in comparison to a 16% fall for fathers. Women were also 1.5 times more likely to have quit or lost their job.

Longer hours, higher stress

At the other end of the spectrum, women are at the forefront in playing a key role in the fight against Covid-19, with 3 times as many women working in health and social care. These sectors have proved resilient to job losses, in fact, many employees have seen their hours increased. And increased work volumes is the reality for many women, with the ONS finding that women were carrying out on average two-thirds more childcare than men during ‘lockdown’.

Unpaid domestic work by women contributes a staggering £140 billion to the UK economy annually. The struggle to maintain a career, as well as childcare, plus domestic home responsibilities has led to higher rates of anxiety and stress. The financial toll of Covid is unmistakable, what’s less obvious is the significant physical, emotional and mental toll that may ensue. Moving forwards it’s important that workplaces cultivate a diverse and inclusive culture.

How can employers help?

One solution may be to create internal women’s networks, which provide a safe space, bringing together individuals with similar experiences fostering a community spirit. Another possible answer could be the implementation of mentoring programmes to encourage networking, this should include male allies as part of the conversation, in an effort to expand the discussion and bring about change.

Flexibility is key

Access to affordable childcare is predominantly the primary barrier for women entering or returning to employment. Covid-19 has provided a catalyst for employers allowing more flexible working. A government-backed think tank – Behavioural Insights Team – identified that women were 20% more likely to apply for senior jobs if they offer flexible hours, making more talent available to the company and greater opportunities for women.

Normalising flexible working for all members of the workforce, where feasible, could prove a promising start for women’s earnings potential and in turn their savings capacity – by allowing women to retain the jobs they had prior to motherhood. There is also the hope that it could facilitate fathers having more home time to shoulder some of the family responsibilities.

Communicate clearly and effectively

Workplaces must take steps to ensure such policies are gender neutral, clearly communicated and evidenced in writing. Limited uptake of shared parental leave is another obstacle to female financial resilience. Introduced in 2015, the benefit allows couples with a new baby to share up to 50 weeks of leave and the ability to split the statutory pay between them. However, in 2019 only 2% of eligible couples made use of shared parental leave – when nearly 650,000 women claimed maternity pay.

Pay Gap equality in the UK was targeted for 2050 and Pension Gap equality 2100. Recent reports suggest the impact of coronavirus on women’s jobs has pushed back equality timelines, with parity now expected to be achieved in 2110 for the Pay Gap and 2160 for the Pension Gap. Women in their early 60s have one third of the pension value of their male counterparts. At a time when for many, money is tighter than ever, offering salary sacrifice will give employee savings a much-needed boost.

Salary sacrifice is an agreement to reduce (sacrifice) an employee’s salary in return for pension contributions with big tax savings. The individual will save both the income tax and national insurance as contributions are deducted from their gross salary and deposited straight into their pension. The additional national insurance saving – 12% for basic rate taxpayers and 2% for higher rate taxpayers - makes their money go further and work harder.

Not only is it tax efficient for the employee, but it also leads to savings for the company – saving the employer national insurance (13.8%) on the portion of salary the individual sacrifices. It really is win win. Remember though that tax rules change and benefits depend on individual circumstances.

Financial wellbeing at work

The pandemic has affected us all financially in one way or another, it’s also likely affected financial confidence, which may in turn impact an individual’s ability to plan for the future. According to the FCA in February 2020, 60% of those showing low financial capability are women. This is unsurprising given that throughout their lifetimes they are likely to experience a pay gap and pension gap.

Education through financial wellbeing programmes will provide a form of defence to future uncertainties. Our financial health is integral to our general wellbeing, with money worries cited as the biggest cause of stress outside of the workplace for both women and men. Research suggests that financial literacy programmes can lead to employee peace of mind and greater productivity at work. The greatest benefit workplaces can offer individuals is to empower them with the knowledge to achieve financial resilience for themselves and their loved ones.