In 2019 I wrote for HRZone about the growing importance of financial wellbeing to the employee experience. A stagnant savings habit and growing consumer debt was looking like it was going to cause a perfect storm that would see financial stress increase for millions of UK employees – and this would inevitably have an impact on their work.

Just three months after publishing that article, the world was plunged into one of the largest public health crises we have ever experienced and very quickly, financial resilience for millions began to erode.

British households began to report increases in financial anxiety, a drop in disposable income and traffic to financial news and education sites boomed

By mid-March 2020, I was again writing in HRZone with my prediction that the scale of the Covid-19 outbreak was going to leave workers significantly concerned about their financial situation. By August 2020, all of these predictions came true as the UK entered a recession and British households began to report increases in financial anxiety, a drop in disposable income and traffic to financial news and education sites boomed.

By early 2021 employees were twice as likely to run out of money by the end of the month compared to before the 2020, and nearly half of UK families reported falling into debt because of the pandemic. 

According to data from the ONS, amid the largest threat to our collective physical health we have ever seen, it was financial wellbeing that Brits said was their biggest wellbeing concern.  YouGov’s key banking insights published this month reveal that half of Brits say Covid-19 increased their cost of living. Step Change’s January 2022 research revealed that one in three people are now struggling to keep up with their bills and credit commitments – double what that figure was before the pandemic. 

Wider economic recovery may mean little to no employees this year

While there are optimistic signs about the economy getting back on track, the pandemic continues to rage on and with it comes an almost unbelievable set of new challenges that I think will test employees’ financial resilience more than at any time in the last 40 years.

This year many of your employees will experience the biggest income squeeze in a generation and they will need your support more than ever. The Bank of England predicts that inflation could rise as high as levels we haven’t seen for three decades – and way above wage growth. 

In 2022 UK households are facing a cost-of-living crisis with each set to see a £1,200 rise in outgoings as energy prices increase, inflation rises and taxes rise. This February, the energy watchdog sets a new minimum price for energy, with experts warning that cap could reach £2,000 or more – double what it was last year. By April, taxes go up too as employees see National Insurance rise alongside council tax bills.

Added to this the rise in petrol and food prices and most employees are effectively looking at a big pay cut. Paul Johnson, director of the Institute for Fiscal Studies told The Financial Times in January: “The combination of substantial tax increases and big increases in prices, particularly energy prices, will be a larger shock for households on average earnings than anything at least since the financial crisis and possibly for a long time before that.”

Re-focus your wellbeing strategy on employees’ finances

At the time of writing, more than 70% of employees say they are stressed about money and this is affecting their work. A new survey by Morgan Stanley has found that 64% of employees say financial stress is negatively affecting their ability to do their jobs. Among younger employees, this figure rises to 70%. In January 2022, younger workers are now officially facing more financial stress than older workers did at their age. 

An estimated one million employees took time off last year due financial stress

As we enter the second full year of the pandemic, financial stress remains widespread. Decades of slow wage growth and a slow recovery from the 2008 recession led to millions entering the pandemic with little to no savings and poor knowledge of financial matters.

While people like me have been banging the drum on workplace financial wellbeing for a decade, I grow increasingly concerned by the number of employers I spend time with that still do not feature financial wellbeing within their wider wellbeing strategy, or do not pay it the attention it desperately needs. Poor financial wellbeing is costing UK employers an estimated £1.56bn.

An estimated one million employees took time off last year due financial stress and almost half continue to admit they have low knowledge of financial matters and lack an understanding of budgeting and managing their money. 

My four tips on supporting employee financial wellbeing in 2022

1. Build Knowledge

Knowledge is a well-known precursor to behavioural change. When a person is fully armed with the information they need, they make better decisions. While knowledge of financial products is low, there is an opportunity for employers to help their people to grow their awareness and ultimately make better informed decisions on how they spend their money. But it has to be easy to do. 

My recent research project with King’s College London found that it was still too difficult for employees to make the changes they needed to. Consider spaced out, quick and bite-sized learning content. Many studies have shown that for people to learn complex things, space out learning delivered in short bursts of less than 5 minutes helps us to retain knowledge better.

2. Help them to make immediate changes to their spending

While almost 90% of us say credit scores are important, 75% of us haven’t checked ours in the last month. An alarming 65% of us aren’t aware of how much we spent last month and less than 700,000 switched current accounts in 2020 despite many banks offering generous welcome bonuses.  

Getting employees to make smarter decisions on the things they are spending money on every day is the best way to get them to start incrementally improving their financial wellbeing and growing their financial confidence and sense of control.

3. Disucss affordable credit

Consider ways you relieve financial stress simply for your people. Of all the research I’ve conducted on financial wellbeing over the last decade, access to affordable credit has remained one of the first steps employers should take.

It is clear the situation hasn’t got any better for UK employees since 2019 and is about to get even more challenging

In the face of rising interest rates, finding more affordable ways to consolidate debt for your people can help to give them more control over their finances and become more optimistic about their financial future. Payroll lending offers employers a low-cost risk free way to do this. 

4. Push key insurance

Holding insurance against key risks is one of the best ways an employee can support their people in the long term. During the pandemic, take up and interest in protection products increased dramatically as employees considered how they might pay their bills if they had to spend time away from work due to ill health or disability.

But in addition to the insurance, products like Income Protection also allow employees to access healthcare professionals, counsellors and other support services that can help them build resilience to and deal with financial stress. 

It is clear the situation hasn’t got any better for UK employees since 2019 and is about to get even more challenging. As social issues begin to influence employer decisions more than ever, employers must do more to protect their people and their business from the impact of widescale poor financial health.

With so many British employees set to struggle this year, employers must put financial wellbeing at the front of the wellbeing strategy if they are to protect their business and cushion the inevitable mental health and absence effects of the rising cost of living. 

Interested in this topic? Read Financial wellbeing: Something isn’t adding up.

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