Is financial stress affecting your balance sheet?

Dale Critchley, Policy Manger for Workplace Savings & Retirement looks at how employee financial wellbeing benefits businesses and individuals.

Very few employers would be content to stand by while an employee struggles with stress. Thankfully, duty of care alone is enough to motivate most to take action. But there’s another reason why it makes sense for employers to take stress seriously: its potential effect on their own bottom line.

The Health and Safety Executive (HSE) report 1 notes that stress, depression and anxiety accounted for 17.9 million days lost through absence in 2019/20 with each episode lasting 21.6 days on average. Longer than any of the other major causes of absence from work. 

Looking at the causes of this stress, declining financial wellbeing is certainly an issue to consider. As a result, employee’s money worries can bring their employer financial concerns, too. Our latest report 2 – ‘Thriving in the Age of Ambiguity’ – shows how changes in our work and home lives, duly accelerated by the pandemic, have impacted the UK’s mental wellbeing. This includes looking at the link with financial wellbeing. 

As you might expect the results reveal a picture that’s far from homogenous, either across sectors or within a single workforce. Outcomes vary widely, with the ‘capacity to cope’ on an individual basis dependent on the extent to which family finances have been impacted, and the financial and mental resilience of individuals. 

It’s important for employers to appreciate the extent to which financial wellbeing is affecting mental health, with possible consequences for absenteeism across every workforce. Just over half (57%) of employees in our survey described themselves as ‘just getting by’ financially. Only 55% usually have money left at the end of the month. This lack of capacity to withstand financial headwinds, or unexpected events, puts millions of workers on the tipping point when it comes to financial wellbeing. 

Around two-in-five (39%) told us that their financial situation is affecting their mental health. Worryingly, almost a quarter (24%) said they thought they’d made bad decisions around debt during the pandemic, and 29% have had to borrow to replace lost income. It’s clear that on top of uncertainty around work life balance, and our ability to do things that were normal pre-pandemic, the additional financial stress on individuals could morph into an increased cost for employers. 

We mentioned that not everyone has suffered financially, and 41% of employees told us that they’d seen their ability to save during the pandemic improve. Financial winners and losers can be crudely categorised by sector. Office workers and those with expensive commutes haven’t had to, or been able to, spend money to the same extent as before. While workers in the industries that might have benefited from that spending – for example, hospitality, retail, and travel – have experienced life on furlough and job losses. In turn, household finances may have been impacted by either or both of these factors.  

Within workforces, we found that younger workers reported making more bad debt decisions, but it’s older employees who are more likely to be kept awake by financial worries. Our report also goes into more detail on the ways different types of workers may respond to similar pressures – serving as a reminder, if we needed it, that a one-size-fits-all approach is rarely optimal.        

Worries aren’t all about the here and now though. Employees are showing more concern about being able to afford to retire, rather than how much they get paid today. Perhaps this is down to a re-evaluation of work, and life after work, triggered by recent experiences. But many (41%) don’t feel equipped to produce a plan to achieve their retirement goals. This is something more freely admitted by women. Over one in five (21%) women admitted to feeling completely unprepared for retirement, while only 12% of men made the same confession. 

This difference between men and women may well reflect the reality of the gender pension gap, but another issue is perhaps our reluctance to talk about finances honestly, and to admit that we could all do with some help sometimes. 

Employers can help break this taboo by engaging with advisers and financial service providers to deliver financial education and, where appropriate, advice. The workplace can prove to be a safe space to learn how to manage finances better, to plan for retirement, or to optimise the returns on savings built up in a current account. Employers can also take a lead in helping employees feel they have more control over their finances, so reducing nagging doubts about whether they’re doing the right thing. 

Employers who want to go a step further might consider removing some of the friction when it comes to implementing a financial plan, by offering a flexible benefits package that includes good value financial protection or saving products, or access to loans, through payroll. Help with pension planning is also likely to be well received: over half (59%) of employees told us they’d be open to this type of support from their employer, with 51% expecting to need employer support as they approach retirement. 

It’s also important to think holistically: physical and mental wellbeing are closely linked, so offering a varied and flexible package of benefits is likely to reap dividends. This might include support on topics as varied as weight loss, fitness, diet and sleep as well as focusing on financial wellbeing directly. Offering team challenges can promote social as well as physical wellbeing.         

It’s always important to remember that taking care of employees means taking care of the business. We strongly believe that a programme to improve financial resilience, as part of a co-ordinated package of wellbeing support, is a benefit that will be welcomed by employees, as well as potentially improving productivity and reducing absenteeism though anxiety and stress. We all stand to gain from doing the right thing.

Dale Critchley, Policy Manager for Workplace Savings and Retirement, is an expert commentator with over 30 years’ experience in a variety of roles within the workplace benefits market. He is an Aviva spokesperson specialising in issues relating to workplace pensions and is regularly featured in the media.

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