How to Improve Employee Financial Resilience
16 May 2023
Using our exclusive Money Mastery research, we explore the state of employee financial wellbeing and its impact on your business. To gather our exclusive data, we interviewed over 2,000 UK employees and over 500 HR professionals, creating a holistic picture, including their employees’ concerns and expectations. During this blog, we’ll use this research to explore why it pays to improve financial resilience in your workplace.
What is Financial Resilience?
Financial resilience is our ability to withstand changes in economic circumstances and money-related pressures. Life is unpredictable. Illness, divorce and the rising cost of living can impact financial stability. To be resilient is to remain financially secure in the long term without vastly changing your way of life and spending. In addition to making sound financial decisions, a financially resilient person will likely have an eye on the future, with savings and plans firmly in place.
How to Measure Financial Resilience
When assessing personal financial resilience, you’ll need to review the savings and liquid assets an individual or household has relative to their personal or combined income.
In addition to this, you need to identify the following:
- Amount of debt.
- Stability of income.
- Emergency savings pot.
- Financial planning practices.
Once gathered, you need to compare incoming Vs outgoing alongside the potential to withstand financial challenges or periods where income may reduce. If the result is that your way of life won’t be significantly impacted or assets lost, you’re financially resilient.
Why is Financial Resilience Important?
Financial resilience is a long-term perspective, and having that security gives peace of mind and stability.
Negative Impact of Poor Financial Resilience on Employees
Financially resilient employees aren’t impacted by money worries. They’re healthier, happier and more likely to retire in confidence. The flip side of this is when people struggle to make ends meet, and that’s when two things tend to happen - they make cuts or borrow, thus increasing their debts. They may also sell some of their assets, affecting their longer-term financial goals.
Making Cuts
When we need to tighten our belts, we tend to cut back on the non-essential items, the luxuries we enjoy but don’t need. A YouGov report found that people are also having to cut back on their daily essentials, with 32% of households making cuts on ‘staple essential food items’.
The 2022 survey also found that 42% of Brits had cancelled their gym membership, and 34% had given up pursuing a hobby due to the additional expense. Gym memberships and hobbies might fall into the ‘non-essential’ category, but let’s consider their impact on mental wellbeing.
In their article, ‘The science behind why hobbies can improve our mental health’, the University of Reading states that having a hobby is linked to lower levels of depression. There’s a proven link between physical wellbeing and mental health, so it should be concerning when employees are cutting back on the ‘non-essential’ activities that keep them mentally and physically healthy.
Increasing Debt
Nearly nine million Brits are in serious debt, and only around a third receive help (FCS). As of February 2023, the average credit card debt per household was £2,277, and the average total unsecured debt per UK adult was £3,965, with the average debt per UK household being £65,510 (The Money Charity).
Households and individuals may always have some form of debt, such as a mortgage or loans for higher purchases, like a new car, but the year-on-year comparison puts things into perspective. By the end of February 2023, the combined total of money people in the UK owed was £1,839.3 billion - a £66.4 billion increase from the 2022 figures.
As we explore in our blog, ‘Debt Awareness Week: Supporting Employees in Debt’, debt becomes a cycle, with people borrowing more to pay off loans. It’s hardly surprising that half of adults with problem debt also have a mental health illness.
Negative Impact of Poor Financial Resilience on Businesses
Is financial anxiety impacting your business? For this blog, we’ll tackle the topic of employee financial resilience, not organisational, which is a different matter. Poor employee financial resilience negatively impacts your business in the following ways.
Increased Absenteeism
Businesses feel the impact when financial anxiety becomes debilitating or has led to mental ill health. Anxiety-related unplanned absenteeism and the number of employees going on long-term sick leave are increasing. Employees experiencing money worries cost the UK economy £120 billion and 17.5 million lost work hours.
7.6% of UK absences are directly attributable to anxiety and stress, and “1 in 6 employees in the UK reported having a mental health condition, and stress, depression and anxiety are leading causes of sickness absence” (Gov.UK). The average rate of absenteeism per employee per year has increased from 5.8 in 2019 to 7.8 in 2023, and this is, in part, due to an increase in financial anxiety and declining mental health.
Reduced Productivity
Our exclusive Money Mastery research found that 62% of employees experiencing financial worries believe they are less productive, and 35% told us they were more likely to take sick leave. When money worries consume us, it can be hard to switch off and focus on other tasks - including work, leading to a loss in productivity. Employees often hide their anxiety and mental health from their employers and continue to work.
Financial Anxiety in the UK
Many people are still feeling the effects of the pandemic, with some industries hit harder than others. However, it’s the cost-of-living crisis that’s impacting employees’ finances today. In the UK, 11.5 million people have less than £100 in savings (FCS). As we reveal in our blog, ‘Cost-Effective Employee Benefits: How to get more for less’, this is less than the cost of a weekly shop for a family of four.
We’re probably all familiar with the phrase ‘saving for a rainy day’, but for many people in the UK, today is that rainy day, and they don’t have a savings pot to help them through it. It’s hardly surprising that one in ten adults feel hopeless about their financial situation.
How to Overcome Financial Anxiety and Enhance Financial Resilience
The statistics show that financial anxiety is impacting your people and your business. Embedding mental and financial wellbeing benefits into your organisation and putting employee wellbeing first is an investment that companies can’t afford to overlook.
With 76% of Brits saying that the government isn’t doing enough to help, employees are turning to their employers to bridge the gap. Our Money Mastery research found that many employees didn’t receive financial support in the workplace, and of those, 57% expressed an interest in their employer providing them with financial education and advice.
Stretch Salaries Further
Our Employee Discounts Platform gives your people savings on everyday essentials and wellbeing-boosting treats and activities - even holidays. Available on the go, employees reap the savings when they purchase discounted voucher codes from a vast range of high street and high-end retailers, online and in-store.
Our Virtual Pluxee Card is another way to offer significant financial support to your employees and their families, allowing them to earn up to 15% cashback at participating retailers. Employee benefits, such as discounts and cashback schemes, provide significant support for employees, especially during the current cost-of-living crisis. Saving money on day-to-day essential products and services goes a long way to improving an employee’s financial situation.
When it comes to financial resilience, your employee wellbeing strategy needs to incorporate more than salary-stretching solutions.
Budget Management
To create a culture of financial resilience, you must ensure employees have the tools they need to face challenges in the future. Financial situations can change for many reasons, some unforeseeable and unavoidable. Financial education + money management tools = reduced employee financial stress and anxiety.
Helping employees make better financial decisions and manage their money today, tomorrow, and beyond is the key to financial resilience. Our Financial Wellbeing App is a hub for helping employees become and remain financially resilient, and offers employees:
- Financial resources and guidance.
- Budgeting tools.
- Salary advancement.
- Employee loans.
- Savings plans.
- Debt consolidation solutions.
Knowledge is power… share it!
To expand their financial knowledge, employees can access various resources, tips, and guidance within our Financial Wellbeing App. We’re not talking about tips on stocks and shares but practical and effective ways to help employees manage their money.
Consolidate Employee Loans
Debt consolidation by Salary Finance helps your people combine their debts into one manageable payment, often with substantially less interest than high-street lenders. It minimises money worries, makes everything easier to cope with, and helps people pay off debts quicker.
Employees with poor financial health may struggle to get a competitive loan, leaving them with only high-interest options. Or not… As an employer, you could fund an employee loan, repaid through salary deductions, providing a manageable and safe way to afford the things they need.
Turn debtors into savers! Once they’ve repaid their loan, you can encourage employees to continue to deduct the repayment amount from their salary and set it aside on their behalf, giving them a nest egg when needed.
Manageable debts = less stress + more financial resilience!
Reduce Financial Anxiety by Supporting Employee Mental Health
Embed an Employee Assistance Programme (EAP) into your business. As well as including financial wellbeing features, it will provide your people with access to BCAP-accredited counsellors 24/7, ensuring there’s support available whenever they need professional and confidential help for when their worries become too big to handle alone.
EAP is another valuable source of support, with advice and podcasts available via a mobile-based app. Our trained counsellors can help employees with anything from how to respond to a parking ticket or unexpected energy bill to supporting them with their mental and emotional wellbeing.
Partner with Pluxee UK to Improve Employee Wellbeing and Resilience
At Pluxee, we’re all about making more of life and adding that extra bit of joy that brightens our days. We shape the world of employee benefits and engagement by bringing to life a personalised and sustainable employee experience at work and beyond. For over four decades, we have been contributing to making work not just a place to be but a place to belong.