Why financial wellbeing is a business performance issue

Nigel Cassidy (NC): Don't let financial anxiety become a silent drain on organisational performance. It's time to help your people with their money worries. I'm Nigel Cassidy and this is the CIPD podcast.

Well the figures speak for themselves, almost half of UK workers surveyed were worried that they couldn't pay any unexpected bills or save for their futures. One in three workers admitted financial problems affected their ability to do their jobs, that in a study for the CIPD's own Good Work Index. Now of course we know the reasons why these are tricky and unpredictable global times. Employees face costlier energy, transport and food bills. They're uncertain about their financial futures. And there's a corporate cost to all the uncertainty, poor staff performance, absenteeism and a loss of engagement. So what can be done to help individual workers feel secure and in control to have a good relationship with their money?

With me, our financial advisor and coach with two decades of experience with employee wellbeing, workplace pensions and rewards from the Everywhen consultancy, we welcome client director Charlie Goodman. Hello.

Charlie Goodman (CG): Hi, Nigel.

NC: We've a certified rewards professional who's worked for more than 18 years across retail, construction, engineering, housing and higher education. Striving, she says, to uphold fairness and inclusion, sometimes in the face of the financial constraints we're all pretty familiar with. It's Mona Parikh, Associate Reward Director at Coventry University.

Mona Parikh (MP): Hello.

NC:  And from the home team, the CIPD's Senior Performance and Reward Advisor, Charles Cotton, who's gathered and speaks about the benefits of employer action on money worries and financial wellbeing generally. Hi Charles.

Charles Cotton (CC): Hi Nigel.

NC: So we're all about helping people with personal issues this month. So I just wonder if our trio faced their own money problems. I mean, I wonder did your employer help or maybe could they have given what you know now?

CG: I think my entire journey into doing what I do today started with my own money problems and in fact it predated employment. It was whilst I was at university and that was certainly a difficult time to feel particularly in control of my relationship with money. I was responsible for the first time for my own finances, looking after myself, making sure I was paying my rent and getting the groceries, etc. And I found myself in very difficult circumstances where we had a dispute with the landlord as many people have heard similar stories before. We decided to withhold our rent and the landlord sent bailiffs round and that was quite a harsh reality of what the world's like for me when it happened, when you have someone banging at your door.

So, yeah, it brought me into, I think, the scope of thinking about what we now call financial wellbeing as something that's important. And at the time, the university provided some support, but I wouldn't say it's anything like I'd imagine you'd probably be able to get hold of now, or at least I'd hope you'd be able to get hold of now when it comes to dealing with debt.

MP: Right now going through looking at remortgaging. So I had a really good interest rate for five years and it's quite worrying looking at interest rates currently when kind of renewing mortgages. So my organisation at the moment, we have a benefit which I am going to take advantage of. We have a mortgage supplier. It was a kind of value-added benefit that we found with our Aviva pensions. And I think this is something that when you kind of look into the depths of certain policies and procedures that you have, you find these value-added kind of benefits. So I am really looking forward to taking advantage of that for my current situation because the costs are looking really high monthly and it is a worry. So yeah, I have been faced with that.

CC: About 8 years ago, one Sunday morning, I heard a bang and looked out and found out part of our roof had landed in our neighbour's garden in the storm, which was a bit of a surprise, reminiscent of the Wizard of Oz, but there was no witch underneath with ruby slippers. Now I assumed that the insurance company would be able to sort it all out for us. But going through the fine print as we went through the helpline, it apparently is just one of those things. And we weren't covered. Now, we are covered now, but we had to kind of rush around and find financing, which as you'd imagine on a Sunday isn't particularly easy. So we could then get a roofer in as quickly as possible.

So if the CIPD at the time had been able to offer me an interest-free loan, that would have taken a lot of the stress out of having to go around various banks and building societies to ask if I could borrow a few 1000 pounds in an emergency to have the roof put back.

NC: So I mean, Charlie Goodman, if you think about being able to provide a short-term emergency loan for somebody. This is quite a big deal for a company setting things up. So it's fair to say employers have thought shy of getting involved. So I just wonder why should these kind of things, financial wellbeing, be seen as a core business issue?

CG: I think we know from years of research now, research carried out by the CIPD and far beyond that, not just in the UK, but globally, but, we probably see around about a third of the workforce are or say they are certainly impacted from a mental wellbeing point of view by money worries, by financial concerns.

So it kind of goes in line in the same way that we think about mental wellbeing, which I believe is taken very seriously, quite rightly now by employers. It impacts productivity. We know that if someone is worrying about their financial situation, they are going to struggle to remain focused on the job. And then there are instances as well where you think it's an operational risk.

Working in financial services myself, there are risks around people potentially being led down sort of darker paths if they're concerns around money. And again, we've seen examples in news stories. I'm sure many of us are familiar with people perhaps committing fraud and various other sort of financial crimes.

So I think it is something that is important from a sort of very operational level, but also from a cultural level, one hopes that most employers wish to have a pleasant culture in which to work in. One hopes that most managers also want to work with teams that are happy and we know that happiness typically leads to better productivity. So it is something that I think employers should take note of.

NC: Well, I get all that, but Charles Cotton, I was quite surprised to see that, according to something new of the CIPD found, is it less than one in seven organisations actually have a financial wellbeing policy? I mean, that does suggest that many may not quite still see the need. Maybe they don't I mean, is there really evidence that money worries do have an impact on performance, retention, engagement, that sort of thing?

CC: Well, speaking personally, when I lost my roof, it certainly affected my productivity and my performance until I got it all sorted. And yes, you can find examples of employees getting into quite severe financial difficulties and this then having an impact on their performance and often that only kind of comes out in the performance reviews when employee, line managers are so, why is your performance fall and what's the cause? And that's when the person then starts explaining, well, it's because of X, Y, and Z.

Now, often many organisations do have things in place to help people, but often they're not kind of packaged as something that can help people with their financial wellbeing. It's often seen as something around health or recruitment aid or a retention aid or something like that. So often organisations do have benefits or an approach that can support their employees. It's just that it's not being formally articulated. And if it was, then employees wouldn't necessarily feel that they're on their own and having to scrabble around for solutions when actually the organisation has solutions itself.

But of course, that then also has another issue around in the UK, we do feel a bit reluctant to talk about money. So there's a kind of a taboo associated with that. And you might feel that if you open up to your colleagues or your line manager about your financial difficulties, then you're going to be judging negatively. So again, it's rather like what we've seen in the world of work over the last 20 years about talking about people's mental health or their sexuality, etc. Once people are that they're more confident to talk about that, then employers can kind of address concerns and needs and wants more easily.

NC: Well, let's ask Mona about that. I mean, can you just sort of tell us more about how you might initiate conversations with people to just see what financial aid or advice they might actually need? Because if there is this taboo around, I mean, do you have to ask them anonymously or what?

MP: In terms of some of the platforms that we have, I think what can really help with addressing these kind of worries for employees are sometimes some AI platforms or platforms which, where they're not having to speak to somebody face to face, but, sometimes it's easier when they can kind of type a question into a platform and get some kind of articles or engage with things that where they're not having to speak to people. So I think in these kind of situations, AI can really help in platforms.

Also, I think what we've seen is, I mean, people don't speak about it, but we've seen engagement with some of our benefits and some of our platforms increase. So our employee discount platforms, you know, when we have a look at the data and the engagement and the reports on a monthly basis, we can see that the engagement has increased with those platforms, and also salary sacrifice benefits. We have holiday buy salary sacrifice, we have car salary sacrifice and the queries coming into the reward inbox around those kind of benefits have increased the more employees understand the tax savings and the NI savings that can be made from some of those.

So one of our challenges is to actually the terminology we use in terms of how we're explaining those benefits. It's like Charles said, it's not packaged in that kind of way. And we've never kind of packaged it in that way. And we are kind of creating now a financial wellbeing hub where everything to do with financial wellbeing is in one place for employees to access. So, and the terminology like we're using, you know, we say salary sacrifice, but sacrifice is quite an alarming term for people when they don't understand what it actually means. So it's really kind of explaining those terms better. So calling it salary exchange rather than salary sacrifice is something that we found that has better engagement with our staff and employees.

NC: And can I just ask you how that hub was created? Does that work across the different platforms? Because I mean, this help and advice is coming from all kinds of different places. I just wonder how you bring it together for people.

MP: It's an internal hub that we are creating using our own intranet. So anything to do with financial wellbeing is being placed on that hub. So any external platforms that we know of, any government sites that are there that can help. So we're kind of having to do that in-house and build our own platform on our own intranet.

NC: And I’d like to ask Charlie Goodman to sort of take that on a bit because you've got all these tools and resources, as I say, they all come from different places. Any sort of tips on how you can be organised because you work with organisations to develop these services so that people can access what they need and it doesn't become very cumbersome for everybody.

CG: It's a good question and perhaps the challenge that we have with all of the employers that we work with, it's certainly something that we're helping people with. Because I think what Mona’s just been talking about in terms of having a financial wellbeing hub, well, there are a lot of resources already out there that are available to people. If you're thinking, particularly for a smaller organisation and are thinking this is beyond our resources, Money Helper, the government's website, has come on leaps and bounds since it began 10 or so years ago and is now a great place for lots of information on all aspects of personal finance and tools as well.

Your pension provider, again, I think as Mona was saying, your pension provider and your insurance providers, a lot of them have hubs already on there. So there'll be information, particularly on your pension provider around the pensions, but on your life insurance and income protection, you might find that there are deeper dive kind of services there as well for financial wellbeing. So there's plenty of stuff available.

The second part, the question or kind of the challenge is how do you get people to engage with it? And I would say in my experience, it is about action and it is about helping people to action. So whatever plan you come up with in terms of financial wellbeing, don't neglect the human element of communication and opportunities to speak directly to people. Email is one thing and a lot of, including the platforms we have, will automate emails and enable emails to go out. But we all know how many emails we receive. It isn't the most effective form of communication. I would suggest, and we talk to clients about thinking more in a hybrid fashion of quick webinars, thinking about videos particularly if they involve people who have been through or got benefit from aspects of the benefits package or the financial wellbeing package. Because, that really helps people relate. They can see people like themselves actually engaging with stuff. It is a very powerful tool.

So you've got to think about the sort of multiple forms of communication to get this across. It can't just be reliant on you sending automated emails saying, this is something you need to think about this month. Once you start taking a more proactive approach, people will listen.

MP: I think in our experience, what we found was that as we were sending the normal kind of staff communications, emails, we weren't seeing the engagement with some of the platforms. And what we did was we went out to the leadership conference. So we tried to kind of apply a top down approach of communicating and cascading the total reward offer that we had. And we went to the leadership conference, we brought our provider along and they did a talk. We got some leaders to kind of tell their stories about, the kind of benefits that they'd had from engaging with some of these platforms. And we did this actually in November and we looked at our dashboard December, January time, and the engagement with the platform had, you could see how it had increased because people were telling their story.

So I think sometimes webinars and HR presentations, yes, they do a job, but I think the bigger engagement comes from peer-to-peer storytelling and the leaders kind of cascading these messages.

And I think there is another university who has been fabulous in doing this and we want to follow suit where they've created a Teams channel where employees can kind of join and they all talk about benefits. And actually, so the reward team runs it, but employees are actually answering each other's questions on this platform. And they're talking about things that have helped them and what they're utilising. So I think these are some of the things that we have experienced in practice, Charlie, like you said.

NC: That's an excellent tip, I think, Mona. Charles, if we could just go back to basics slightly. You did mention, or we mentioned earlier on, the rather low level of organisations that have a formal financial wellbeing policy. I know the list could be quite long, but can you give me a bit of an idea of what sort of things would you put on the policy that would inform how you help people?

CC: Yes, as you suggest, it would depend on various circumstances of the organisation, but the three building blocks for financial wellbeing is around pay, pay progression and employee benefits.

So when I talk about pay, it's are people being paid enough? Are they getting a living wage? For instance, a wage they can live on if they're a low wage worker, that may also, are they be giving enough hours of work so they can have a sufficient income? But also it's linked to kind of fairness around, you know, do you know how you're being rewarded? Why are you being rewarded? Why people in different parts of the organisation are getting paid differently to you? Because that can have an impact on your financial wellbeing as well.

The second part is around benefits and here we're talking about benefits that reduce the risk of people falling into financial difficulty, benefits that help people if they have fallen into financial difficulty to get out of financial difficulty, that spread or expand I suppose the purchasing power of the wage packet that people get, and helps them become a bit more aware in terms of when they're spending their money, saving it or investing it, how they can make the best of their money.

And thirdly, as I said about progression. how easy is it for low wage workers to progress their careers? What kind of interventions or programs have organisations got that will help low wage workers progress their career to become a team leader or manager, etc.

Now, as I said earlier, it rather depends on all the circumstances of the organisation. So if you were a retail company, then the majority of your staff are going to be focused on pay, you know, in terms of is this enough for a decent standard of living. But they'll also be interested in a certain wellbeing benefits as well, such as around health, especially occupational sick pay, for instance. But also when I come to retirement, what's going to happen then? What kind of pension am I going to get? So again, there may be, there'll probably be interest in pensions as well.

If you are perhaps at the other end, perhaps an engineering firm or a law firm, then the majority of your employees are probably going to be paid in the median or higher of national earnings. So there the focus is more going to be in terms of pay around fairness, about progression, but also how can I kind of be more savvy about the money in terms of investments, for instance, or savings. But in those instances, whilst you don't have the concern about in-work poverty. You do have problems of people falling into financial difficulty because of unexpected events such as divorce, bereavement, illness, or some other problem.

NC: Or half the roof playing off.

CC: And therefore, you know, what can organisations do to kind of support those people who suddenly find themselves bereaved or ill or divorced?

NC: Look, Charlie, this is a pretty extensive list and it strikes me that if you really try and answer some of these questions in relation to how you treat people, you might be opening up quite a big can of worms in terms of your organisation's pay and conditions policies.

So is this your experience when you help organisations with all this, that it does raise quite fundamental questions?

CG: Well, we deal with a lot of organisations, so I think, or I have dealt with a lot of organisations. So of course, sometimes you do hit on things. There are questions I think, particularly perhaps we run a pensions webinar, perhaps we set up salary sacrifice for the first time for pensions and an employee might ask what's happening to the employer national insurance contribution saving. Some employers share that, some employers don't. In fact, most of our research suggests they don't. But I think you do need to be ready for some of these tougher questions. And usually the only reason that people struggle for answers is because they haven't really given them a thought.

So this kind of brings us back to thinking about the reward and financial wellbeing strategies. We talked about financial wellbeing strategies not being in place, but particularly for SMEs, there are many that might not even have a reward strategy. So they are complementary. They are in a symbiotic relationship effectively. So both are very important and most businesses should start with the reward strategy and the financial wellbeing one should be next.

But I think on questions, a lot of the financial wellbeing strategy will also be setting boundaries of understanding what as an employer is in your control and you can do something about and is reasonable for you to do something about. and what you shouldn't really go into. And I think there's been a lot of fear in the HR community over the last 20 years and beyond with the wider senior executives as well around being seen to be giving financial advice. And I think in many cases it's probably unmerited. I don't think there's actually the risk that people believe there is, but I think it is important that people know where they can get the answers from and where they can signpost people to. And as I've said, and I'll probably continue to mention, is Money Helper is a really good place.

If you've got people who are struggling with things or struggling with understanding things, then Money Helper is your friend in terms of just going, I don't know the answer to that question, but here's somewhere to go, or you've got a problem with debt, there's a great section of Money Helper dedicated to that, for instance, and that's the sort of thing that people just should be ready to do.

NC: And does that chime with your experience, Mona?

MP: Like you say, sometimes there's a little bit of a, I guess, follow the trend and add lots to the menu kind of perception of, let's just add more and more things to the menu. And I think having a financial wellbeing strategy, the reward strategy, absolutely. I think the big one is the comms strategy that goes with that and how you're going to communicate everything you have on offer.

And I think, as I said earlier, you know, some of the terminology that’s, so we have the EAP programme. I mean, we say, here's an EAP. And even actually, if you kind of say.

NC: Sorry, what's EAP?

MP: So exactly. So it's the Employee Assistance Programme. So I think this is where you also get into confusion of, okay, so what are you assisting me with? So what is the assistance? And I think, you know, it's kind of really, really using the right terminology. And like you say, when you say EAP, a lot of employees say, what is that? And it's explaining that properly.

So I think one of the usages of the EAP is, to get finance advice and to get legal advice and all of those kind of things. So there are certain things that we absolutely won't be able to cover and answer. But if we're communicating everything we have properly and keeping that kind of drumbeat of communication through the year, I mean, that is what our focus is now. So we know that we have everything, if we don't have everything, we know that we've got professionals that they can speak to, but it's about guiding them and directing them as to where to go to be able to look for those and not keeping them hidden as sometimes they are.

NC: I can ask you, how's the process of questioning your financial wellbeing offering sometimes caused you to even think about changing suppliers because you could do better for people?

MP: Absolutely. I think we are continuously kind of reviewing our suppliers and sometimes, what organisations can tend to do is to kind of stay with one supplier for a long period of time and not doing the kind of market reviews. And through doing that, we found, a better premium that we've able to gain. So saving the business money as well as kind of saving the employees money. So that's absolute, I think, key. And I think in doing that, what we found are these value-added benefits.

So for instance, we currently have a life insurance provider, having spoken to them and having spoken to them at renewal, you know, we've managed to negotiate a digital GP service for all of our employees through that provider. And that was something that we didn't know that was there until we actually kind of spoke to them, even though they've been our supplier for quite a few years. So, and I think sometimes when reviewing suppliers, what ends up happening is they can kind of end up thinking, gosh, they're doing a market review. What is it that we can provide to kind of keep them? So, these are some of the things that we discovered when reviewing some of our suppliers.

NC: Okay, well, we've covered a lot of ground. I just want to kind of draw this together. Charles, what's the HR role in all this? How can HR people nudge this process of better financial wellbeing along?

CC: I think it's making the case within the organisation that they should be investing in this area. For instance, we know the impact that it has on performance and productivity, but there's other issues to consider, for instance, how it impacts on your ability to attract and retain people, how you're viewed as an organisation by investors or customers also play. Now obviously organisations have limited budgets so if you're a small organisation then a case it may be focusing on things like are we paying staff enough, are we giving them enough hours and things like as Charlie said around financial advice or information and guidance you can be referring your employees to the Money Advice service.

Now, the Money Advice Service has its Talk Money Week, so you can arrange to kind of communicate how you support your employees around that and also encouraging them to kind of say, well, if you've got money worries or concerns about pensions or whatever, you can visit the website and get more information. Similarly, there's a, so they're called a National Pensions Week as well. Again, you can use that to talk about pensions within your organisation.

So some of these are kind of relatively low cost, but you know, there are other interventions. So for instance, when I was talking about my roof disappearing, employers can offer interest free loans, but also they can allow people to access their money early, earned wage access, that could be another option. And now we're seeing a government backed initiative for organisations to set up payroll saving schemes where employees commit to kind of having a certain amount of their money deducted each month through payroll and that helps build up a financial buffer. So if they do have a problem such as, the boiler breaks down or the car breaks down, they've got a financial buffer there that allows them to respond to that. You know, they've got that, they can draw down that money.

And as research shows that if people are more confident in their ability to deal with problems as they arise, then that is reflected in their work.

NC: Okay, and of course they can read your CIPD reward and benefit report, which I know is supported by Everywhen and there's a lot more information on what organisations are doing or could do. Final thoughts then from you, Charlie.

CG: I think in the way that we look at financial wellbeing, I think the first and foremost for HR professionals is make sure you're looking after yourself first.

I think there are some really simple and straightforward steps you can take to actually get on this journey. As we've mentioned, as Charles was just repeating about the Money Advice Service through Money Helper and also things like Talk Money Week and Pension Awareness Week as it has now become, which you can find on pensionawarenessday.com, which is the free series of events run by the pension industry, typically in the second week of September. So there are a number of things.

Again, as Mona mentioned, existing benefits you have in place will have a lot of items that you may or may not be aware of, things like the mortgage help that she was able to get. And I would start there.

A financial wellbeing strategy doesn't need to be complicated. Keep it simple, particularly to start off with and see how it goes. Communication is going to be the most vital thing. Do not rely on automation there. It's important to engage directly with your employees and bring them along. But, it can be simple and you can, as I say, cost effective because you can use free resources that you already get from the government and your providers.

NC: Well, Mona's nodding away there about the communication which is already mentioned. For you, what's made the biggest difference?

MP: In the challenging financial environment that we're in, continuously kind of adding benefits, biggest benefits to the benefits catalogue isn't always the solution. Like I said, I think what I've learned from my experience of being in organisations is that, and it's not only Coventry, it's in all the other organisations I've been in, is the engagement of employees and ensuring that they know where to find everything and making sure that all our benefits that we have are sustainable, they're equitable, they're operationally manageable, and they're genuinely aligned to our employees' needs. So, you know, I think that's what contributes to the stronger engagement of all our benefits and the retention outcomes as well.

NC: Thank you to our fine and highly financially literate trio of Mona Parikh from Coventry University, Charlie Goodman of Every When and CIPD's Charles Cotton. Next month you can join us at the CIPD Festival of Work as we explore the brave new world of skills-based recruitment. It seems staff recruited for specific roles on the strength of their qualification or job history being found wanting as business needs and technology change so rapidly. So how might you rethink job design and hire people their skill and adaptivity.

Until then, from me, Nigel Cassidy and the podcast crew, it's goodbye.