With the soaring cost of living, it’s never been clearer that supporting employee financial wellbeing is the right thing to do; it’s an essential element of good work and responsible business.
And now the business case is clearer than ever too – the CIPD has reviewed the best available scientific research on the impact of financial distress on workplace performance. More practically, it has also reviewed what works: the most effective ways to support financial wellbeing.
Financial distress is a major cause of stress and anxiety, which impedes our performance and productivity at work. Research has shown that those who experience financial stress are more prone to absence from work – either because they need time to handle personal finances, or because of emotional exhaustion and stress-related illness. One study highlighted in the CIPD’s new evidence review, which will be published later this week, found that personal reasons typically caused two days’ absence per year, with workers experiencing higher financial stress levels reporting more days absent. Financial distress can also lead to presenteeism, where people attend work but don’t perform to their usual standards.
Financial distress is the flipside of financial wellbeing – feeling secure and in control of your finances. It’s knowing that you can pay the bills today, can deal with the unexpected, and are on track for a healthy financial future. Much like our mental and physical health, there’s plenty of good evidence to champion the idea that employers play an important role in supporting financial wellbeing.
The most obvious role employers play in supporting financial wellbeing is to pay a fair and liveable wage that help prevents people from falling into difficulties in the first place. But that’s not always enough, and research shows that there’s much more employers can do to help people feel more confident and empowered when it comes to money matters.
Many of us don’t like talking about money – perhaps because of stigma surrounding issues like debt and because financial wellbeing relates to other sensitive issues such as mental wellbeing and absence from work. But building money conversations into our everyday lives helps us build financial confidence and resilience to face whatever life throws at us.
That’s why every year, Talk Money Week (8-12 November 2021) encourages people across the UK to open up about their finances in order to improve their physical, mental and financial wellbeing. This year, the CIPD is taking the opportunity to remind employers why they should put in place a financial wellbeing policy, which they discuss openly and regularly with their workforce.
The CIPD’s new report finds that support services such as financial education, debt counselling and holistic employee financial wellness programmes can all be effective. But, it can be challenging to get people to engage with financial wellbeing initiatives at work. So it’s important for business leaders to encourage open discussion about financial issues by normalising conversations about money. For example, by talking openly about the money worries they have confronted or even the organisation’s financial situation more generally.
To help reduce stigma and make employees more likely to access help when they need it, HR teams can also use communications channels and encourage people managers to signpost employees to sources of financial wellbeing. Involving employees in the development of your financial wellbeing strategy can also help break down barriers.
Supporting financial wellbeing may seem like a big undertaking, particularly for small businesses with limited resources, but any employer can begin to build a financial wellbeing policy with these three simple steps:
1. Let your workforce know that they can get free, confidential and independent money and debt advice from the government’s Money and Pensions Service
2. Make sure your workforce is fully aware of all the benefits you currently offer and how to make the most of them
3. Begin a dialogue with employees and line managers about the financial challenges and opportunities faced by them and the business. This will show your concern and help to break down the stigma associated with money problems
For employers who have the resources to do more, the CIPD recommends developing a more comprehensive financial wellbeing policy (integrated within a wider wellbeing policy), that includes the following commitments:
1. Pay a fair and liveable wage to prevent people falling into difficulty
2. Develop a financial wellness programme that helps protect employees from financial shocks. This can include several strands, such as:
- giving employees more control of their finances through hardship loans or earned salary access
- employee benefits that reduce living costs
- financial education that develops 'soft skills' of attitude, judgements and behaviour - for example, making people be more inclined to plan or save
- debt counselling for those who need it, in conjunction with other support
3. Communicate about financial wellbeing regularly through a range of channels, both to promote available supports and to encourage open discussion about financial issues
4. Assess employee financial wellbeing, using tried and tested measures, to inform or prioritise action
5. Make sure everyone in your organisation knows why they are paid what they're paid, and what they can do to increase their earnings
What’s clear from the evidence summed up in the CIPD’s new report, is that developing a concerted approach to supporting financial wellbeing is not only in employers’ interests, but is also something in which they can make a real difference.
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About the CIPD
At the CIPD, we champion better work and working lives. We help organisations to thrive by focusing on their people, supporting economies and society for the future. We lead debate as the voice for everyone wanting a better world of work.