Do employers know what their employees worry about? Research by Wagestream this year found that employers think only 2% of their employees worry about money every day, when in reality 24% of UK employees do so.
This disconnect between employers and employees would be cause for concern in normal times. Given the rising cost of living and the impact of the Covid-19 pandemic, the financial wellbeing of employees is an even more pressing problem. Earlier this year, the charity StepChange found that 15 million adults in the UK said they were struggling to keep up with their bills and debt payments, which is twice the amount from just before the pandemic.
Things are likely to get worse: the Resolution Foundation estimates that the typical working-age household is expected to see incomes drop by £1,100 (4%) over the next year, potentially pushing 1.3 million people into poverty.
When employees worry about their financial wellbeing, employers suffer, too: recent research by the Centre for Economics and Business Research found that an estimated 13 million worker days were lost due to financial worries in 2021, with absenteeism due to financial distress estimated to cost UK employers up to £2.5 billion annually.
What role can employers play?
Employers have an absolutely crucial role to play in their employees’ financial wellbeing. Financial wellbeing is about enabling people to feel secure and in control of their finances, to stay on top of their current obligations as well as deal with any unexpected outlays. Employers fundamentally shape the financial wellbeing of employees through pay, but beyond setting a fair salary there are other important ways in which employers can support their staff.
There is a large appetite for this: over two-thirds of UK employees want more support from their employers when it comes to money. Research by Cushon found that 72% of employees surveyed wanted access to a savings scheme via their employer, and 92% of employers wanted to implement a workplace savings scheme.
What did we find in the Financial Capability Lab?
Over the past six years, we have explored and tested promising ideas to improve financial wellbeing in the Financial Capability Lab, a partnership between the Behavioural Insights Team (BIT) and the Money and Pensions Service (MaPS). We generated 244 new ideas, explored the 17 most promising ones in depth, and tested a few with over 130,000 people at a dozen companies. Here we discuss what we found out about how employers can better support their workforce.
One of the most promising ideas we tested was payroll savings, which allows a portion of an employee’s regular salary to be automatically transferred to a savings account. Such accounts allow employees to effortlessly build a crucial savings buffer at the rate they choose.
We found that behavioural science can be used to make payroll savings more effective. Working with a payroll savings provider called Level and Capita, a large UK professional services firm, we found that a small behavioural intervention can dramatically increase sign ups for payroll savings: We sent people a ‘soft default’ email with the subject line ‘we’ve set up an account for you’, which led to a 4-fold increase in people signing up to the account.
Payroll savings can have many benefits for those who use them, ncluding helping people develop a regular saving habit and supporting employees with low financial confidence. Payroll savings schemes are shown to be most effective amongst those who need them most and those who have struggled to save in the past. We also found that most people stuck to the default savings amount, suggesting that choosing this default is key, and that offering a small financial incentive, if feasible, is likely to boost sign ups.
We also tested peer-to-peer financial guidance. Research from the FCA shows that over half of employees (57%) want financial advice in the workplace. The Financial First Aider (FFA) programme seeks to allow employees to seek guidance from a group of colleagues who are trained to discuss financial matters and signpost them to other trusted forms of assistance.
We ran a small pilot to explore how such a programme could be implemented, however we were not able to measure its impact given its size. We identified a series of lessons that could be helpful when implementing such a programme. We think this idea merits further exploration and are keen to discuss it with interested partners.
Thoughtful and forward-thinking employers should put together a financial wellbeing approach. To help you do so, we have the following rules of thumb on financial wellbeing for employers:
- Make financial wellbeing a key part of your overall wellbeing strategy, and think about the role employee benefits (pensions, health care etc.) can play.
- Learn about your employees’ needs and tailor your financial wellbeing offer to those needs.
- Test new initiatives and evaluate their impact on employee financial wellbeing before rolling them out to avoid spending money and energy on projects that don’t work
- Get some advice and look at what others are doing. While tailoring and creating bespoke programmes is essential, there is support available from organisations like ourselves and MaPS who can help you find innovative ideas to suit your employee needs.
- Championing financial wellbeing is for everyone, and you can start large or small depending on your priorities and available resources. We found that small and medium sized organisations tend to have a strong and trusting relationship with their employees, which can help them design approaches that make a real difference to their employees’ financial wellbeing.
Supporting the financial wellbeing of your employees is one of the most meaningful things you can do for them. We hope that this article provides you with the inspiration you need to put together or improve your financial wellbeing approach.