Analysis | Why should employers take action on employee financial wellbeing?

Rising costs impacting groups differently

It should be noted that the rate of inflation is an overall measure. Analysis of Office for National Statistics (ONS) data found that lower income groups face a higher rate of inflation than higher income groups.

One explanation for this comes from a study of grocery prices that found the prices for the most expensive groceries increase less than the prices for the least expensive groceries. This is because the lowest price brands are less likely to offer special deals, such as ‘buy two get one free’, than the more expensive brands. The impact of disproportionate rises in food costs can be seen in the work of Trussell, a food bank charity, who delivered more than 3.1 million emergency food parcels between April 2023 and March 2024.

As well as groceries, ONS research found the lowest income households spend proportionately more of their budget on essentials, such as housing, heating and lighting, which have increased more than other items used to calculate CPIH. Furthermore, the ONS found that in 2024, those in private rental accommodation also faced a higher inflation rate (3.9%) than those owning with a mortgage (3.1%).

Even before the pandemic, money worries were already a major cause of stress for many. Research from the charity Money and Mental Health highlights that in England alone, 1.5 million people are experiencing both problem debt and related mental health issues.

Implications for the workplace 

How does a reduction in employees’ financial wellbeing in turn impact the workplace?

Many employers have demonstrated their support towards the financial wellbeing of their employees. CIPD research shows that 44% of employers have either signed up to the voluntary Living Wage or pay at or above that amount because they see it as the ‘right thing to do’. Other organisations (21%) did so to improve productivity, being conscious of the impact that poor financial wellbeing can have on the business.

The CIPD’s Financial wellbeing: An evidence review found that money worries can cause absences, either because people need time off work to deal with these worries, or because they are too stressed to work. It can also cause presenteeism as people would still turn up, but due to financial concerns, are not fully focused.

An example could be an employee suffering from fatigue because they have lost sleep worrying about their finances, or they spend working time trying to sort out cash problems. So not only do money worries impact employee wellbeing, they can also affect employee and organisational performance.

Money worries impacting work performance

In February 2025, a survey of around 5,000 employees commissioned for the CIPD Good Work Index^* (GWI) found that 31% said money worries had negatively affected their work performance. Among staff earning less than £40,000 a year, 37% reported this and even 22% of those earning £60,000 and over said the same.  

The survey also revealed the ways money worries affected work performance: 19% of all employees said they had lost sleep due to worrying, 15% said it had caused health problems such as stress, and 13% said these worries made it hard to concentrate or make decisions at work. Young workers and those earning less than £40,000 were most likely to report this. 

Meanwhile, 30% of employees said they could not cope with an unexpected £300 bill, and this rises to 52% among those earning less than £20,000 a year. This is especially true for hospitality (43%) or retail (41%) workers. On top of this, most people employed in retail and hospitality do not think their pay is enough to help them save for retirement.  

Only 35% of those paid less than £20,000 a year said they are keeping up with their bills and credit commitments without any problems. This is essentially the same as reported in 2024, despite the 9.8% increase in the National Living Wage last April.

What can employers do?

Workplaces face a tricky balancing act. While employees in the UK are beset by a bevy of hikes in everyday bills this April, including water, energy, council tax and insurance, lots of organisations are also met with higher employment costs and the effects of a possible trade war. And given the dangers of poor financial wellbeing, organisations should think and act strategically, including:

• ensuring the organisation’s pay outcomes and processes are fair, such as by checking the reasons for pay gaps, or conducting equal pay reviews
• paying workers as much as is affordable and ensuring that those at the bottom of the wage scale earn enough to live on
• highlighting useful sources of financial information and guidance to employees, such as the Money Advice Service
• possibly becoming an accredited Living Wage Employer as those that have signed up, or are in the process of signing up, report a range of business benefits, such as improved employee commitment and motivation
• creating a financial wellbeing strategy that supports (and is supported by) the organisation’s overall health and wellbeing strategy. This should include running financial education and benefit communication programmes to make employees aware of their options and how to get the most from their options
• exploring how low-waged workers can progress in their careers and increase their earning potential. For example, providing learning and development opportunities that enable people to learn new skills and take on additional responsibilities
• stretching employees’ earnings by providing staff benefits, either directly or through a voluntary benefits scheme. Explore which benefits suit the needs of the workforce, investigating whether these can be offered flexibly so people can select those that best suit their circumstances
• providing support mechanisms should employees fall into financial difficulties, such as hardship loans, access to debt counselling, or earned wage access
• establishing support mechanisms to reduce the risk of employees falling into financial difficulties, such as providing payroll saving that helps employees build up a fund for financial emergencies, or occupational sick pay so people do not suffer a financial crisis if they are away from work due to illness, and
• investing in people management capabilities to help boost productivity and make pay rises more affordable.

By creating and then communicating a financial wellbeing strategy, employers can stand out in the labour market. Earlier CIPD research found that 59% of staff believe it is important that their present employer has a policy to support and improve their financial wellbeing. When it comes to looking for their next job, 65% said it is important that a future employer does this. This demonstrates that a strong business case for investing in the financial wellbeing of workers.

^{* The survey for the CIPD Good Work Index 2025 was conducted between 8 and 18 February 2025. In total, 5,019 working adults based in the UK responded.}

You can hear more about employee financial wellbeing and ways to support it in your organisation at the CIPD Reward and Benefits conference on 14 May 2025.