Written by Darren Laverty
Workplace Financial Wellbeing Strategist
Poor employee financial being is a problem that unfortunately most employers will face for the foreseeable future. The negative impact for employers is evidenced by the recent rise in industrial action, the labour shortage, employee turnover, increased stress levels and poor employee engagement.
When an employee feels stressed about money, they are less productive, communicative and innovative. The pain they feel is eventually often attributed to their employment and they can react by being less engaged, asking for more money and/or resigning to seek higher pay elsewhere. Ignoring this problem is a false economy, the fees to an employment agency plus the productivity downtime costs are often a lot more than the budget required to help fix their financial wellbeing.
The limited time and budget that employers are applying to support the financial wellbeing of their people is often fruitless or a complete waste of time. But why?
It is because many employers are focused on the wrong things. Many are scanning the market for the ‘silver bullet’ that will solve the problem. Then they enthusiastically introduce this new intervention to their workforce full of high hopes, but they all too often come away feeling disheartened and dejected at the sheer lack of employee engagement experienced. To fix this problem, employers need to look at financial wellbeing from a completely different perspective.
The traditional way of looking at financial wellbeing, such as offering financial services products, delivering some traditional financial education, introducing a new app/software solution may well be required at some stage, however, they represent only 20% of the solution – I call it the mechanics.
The other 80% is generally unnoticed or overlooked. For many very intelligent and well-meaning financial services professionals, it is totally invisible. They are left trying to squeeze every tiny bit of value out of the 20% they are working with, to little or no effect.
What is this invisible aspect of financial wellbeing? This other 80% is the psychology - the mindset of employees, their relationship to money, their goals/aspirations/objectives, their habits & behaviours, their sense of control, their confidence…. I could go on.
Basically, it is their WHY? A sufficiently motivated employee does not actually need the mechanics that an employer offers as they will often find the answers themselves on the internet if required. In saying that, we should always offer the 20%, but the right 20% not just throwing mud at the wall hoping some sticks.
Employee benefits packages can play a large part in building solid foundations for employee financial wellbeing, but most of the time they don’t often due to lack of communication or understanding of what’s available. They then become a list of products but have little meaning and context in the life of a typical employee. The traditional education/comms around employee benefits are often too focussed on the mechanics and not the direct practical benefit to an employee and his/her family. Employee benefits can cost as much as 20% or more of payroll but rarely deliver the high degree of financial wellbeing that they are capable of. For a fraction of that cost, psychology can be introduced to bring through their true value. This is a good place to start on a workplace financial wellbeing journey, to get more value from what you already have in place. Most employee benefits packages were designed 10, 15 or 20 years ago, most require a review to ensure they are appropriate for the current financial wellbeing needs of a workforce in 2022.
It is very possible and quite straight forward to improve someone’s financial wellbeing without altering their financial situation. If an individual can focus on what they ‘want’ in life and not on what they ‘fear’, they will feel much more resilient. If they have clearly defined future financial goals, these goals can appear larger in their mind than the problems that life may present along the way and thus have more mental strength to tackle these problems. Nothing mechanically has changed, but they are better prepared psychologically to tackle their financial challenges.
The media is constantly focussing people on current world and UK economic problems and causing much fear and totally unnecessarily I believe. The answer is to get people to focus on what they ‘want’ and not what they ‘fear’. Focus = feelings. Numerous mental health problems are triggered by money worries, many of which are not real!
If an employee has clearly defined, well thought through financial goals & objectives, then executes a realistic plan to achieve them, their stress goes into the plan and away from themselves. These goals and plans can even work for those who are in debt and struggling - it’s important to see light at the end of the tunnel to stay motivated and moving forward.
It is also important when building a workplace financial wellbeing strategy that employers be wary of anything that is ‘free to employer’. Whilst the free element can be very attractive these days, there is no such thing as a free lunch! Many of these ‘free’ offerings are a financial services company using financial wellbeing as a tool to attract employees to their proposition which is often a loan or an investment product or service. At the end of the day, you get what you pay for.
Best of luck out there on your financial wellbeing journey.