Do employers know what their employees worry about? When looking into employee financial well-being, research by wagestreamthis year found that employers think only 2% of their employees worry about money every day, when in reality 24% of UK employees are worrying about their financial stability and security each day.
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 well-being 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 as those listed in 2019, pre-pandemic.
With finances already a difficult topic of conversation between employers and employees, it is set to get worse before it gets better. 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 well-being, employers suffer, too: recent research by the Centre for Economics and Business Research found that an estimated 13 million working days were lost due to financial worries in 2021. Employee absence due to financial distress is estimated to cost UK employers up to £2.5 billion annually.
How Can Employers Help To Ease Financial Stress?
Employers have a crucial role to play in their employees’ financial well-being. Financial well-being 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 circumstances. Employers fundamentally shape the financial well-being of employees through pay, but beyond setting a fair salary there are other important ways in which employers can support their staff.
Implementing a Savings Scheme For Employees’ Financial Well-being
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.
Much like a pension scheme, a workplace saving scheme is set up so that employers can pay a set amount directly into a savings account for their employees, helping them to make savings easily each month and ease financial stress with help from their workplace.
Creating Payroll Savings With The Financial Capability Lab
Over the past six years, the BIT team have explored and tested promising ideas to improve financial well-being 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.
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.
Financial First Aid In The Workplace
We also tested peer-to-peer financial guidance. Research from the FCA shows that 57% of employees 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.
At BIT 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. This idea merits further exploration and we are keen to discuss it with interested partners.
Using Behavioural Science To Reduce Financial Stress In Employees
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.
Payroll savings can have many benefits for those who use them, including helping people develop regular savings habits and supporting employees with low financial confidence.
Payroll savings schemes are shown to be 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.
Tips For Increasing Employee Financial Well-being
Thoughtful and forward-thinking employers should put together a financial well-being approach for their employees. To help you do so, we have the following rules of thumb on financial well-being that employers can use:
- Make financial well-being a key part of your overall well-being strategy, including employee benefits (pensions, health care etc.).
- Learn about your employees’ needs and tailor your financial well-being offers to those needs.
- Test new initiatives and evaluate their impact on employee financial well-being 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, our Behavioural Science Consultancy services are here to support you in finding innovative ideas to suit your employee needs.
- Championing financial well-being 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 well-being.
Discover Behavioural Insights That Support Employee Financial Well-being With BIT
Supporting the financial well-being of your employees is one of the most meaningful things you can do for them.
At BIT we use behavioural science and insights to help our partners improve their offerings, whether for clients or their internal team.
If you are interested in learning more about behavioural insights and how they can help your organisation or business, get in touch with our expert team today.