This is the message from Sarah Steel, Director of independent financial education provider Better with Money. We sat down with Sarah to discuss how employers can help employees develop resilient mental wellbeing habits when it comes to financial planning.
Critical cost
According to The Money and Pensions Service, almost 8 in 10 employees say their money worries affect their performance at work. Lack of financial wellbeing results in 4.2 million working days each year being lost in absences.
“Poor financial wellbeing amongst employees can reduce a business’s income by 4%, so it’s essential to help employees safeguard against financial shocks,” Sarah says. “The pandemic has seen many people furloughed, made redundant or lost loved ones – many of whom will have been breadwinners. And even in so-called ‘normal times’, financial shocks have often occurred from getting divorced, having a baby or even just from unexpected bills, such as replacing a car or boiler.
“Part of helping with resilience is offering a decent short-term sick pay scheme and making employees aware of it to put their minds at rest because it’s the worry about money that causes stress and absence,” she adds. “Similarly, don’t just throw money at employee benefits, but start off by understanding what you’ve got, whether it meets the needs of your people and your business, communicating it effectively and then seeing if there are any gaps.
As well as providing a pension scheme, most medium-sized to large companies offer death-in-service cover, and some can provide anything from will writing services, travel insurance and financial coaching to private medical insurance (PMI), critical illness cover, income protection and personal accident cover.
Promoting the Employee Assistance Programme (EAP)
Health-related insurance schemes, as well as providing peace of mind, often include EAPs to offer employees free and impartial 24/7 stress counselling and a range of other services like legal help, debt management, handling divorce finances and elderly care guidance.
But many EAPs enjoy only minimal usage because employees don’t know they’re available, whereas well-communicated ones can have usage rates of over 10%. “In my opinion, EAPs are one of the most undervalued benefits available. They can help with financial resilience in times of hardship as well as with broader mental wellbeing, and are typically also available to employees’ families,” Sarah says.
“With nearly a million people a year in the UK finding themselves unable to work due to illness or injury, communicating the security provided by any health-related insurance schemes available should also be a high priority. As well as making employees more resilient, this will enable employers to make the most of their benefit spend from a recruitment and retention angle.”
Education, education, education
Using specialist external financial education services for webinars, seminars, or one-to-one coaching sessions can be a cost-effective way of highlighting exactly what such benefits can do as well as making employees aware of a range of other important considerations that can help build financial resilience.
“We can help them understand their financial risks and the importance of budgeting and of having a rainy-day fund to cover at least three, and preferably six, months of essential outgoings,” Sarah adds. “We also explain that, with savings rates so low, paying off high-cost debt should be an immediate priority.
“For short-term goals, we often highlight the piggy bank facilities most banks offer nowadays so employees can set up individual pots for things like holidays, Christmas and school trips. For medium-term goals, we encourage consideration of ISAs, including Lifetime ISAs for property purchase, whilst long-term goals tend to centre around pension and retirement.”