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The impact of financial stress on the workforce

The impact of financial stress on the workforce alt

It’s sadly fitting that April is ‘National Stress Awareness Month’. The emptying of supermarket shelves signalled the start, as panic began to spread across the nation.

It seems an age ago that Australian bushfires dominated the headlines. The worry and stress caused by this filtered across the world, and clearly had an emotional impact with people showing huge kindness and support. But global events such as the situation we now find ourselves in as a result of the Covid-19 pandemic, clearly bring stress and worry closer to home.

Financial stress

Of course, a huge part of the stress that will be felt by employees at the moment will be fuelled by financial worries. Some will have lost jobs and be worried about finding a new job under the circumstances. Some will have been furloughed and not know whether they have a job to go back to. In both cases, many employees will be very worried about making ends meet. Before the Covid-19 pandemic, our research showed that over 91% of employees are worried about their financial situation [1]. The arrival and impact of Covid-19 will only serve to compound this stress and worry. According to The Money Charity, the UK went into the current crisis with 12.8 million households having no savings or less than £1,500 [2], which means many will be unable to support themselves or their families if they lost their jobs as a result of the pandemic. It goes on to report that 4.8 million people are living without at least one essential household item, such as a fridge, cooker or washing machine, which will make lockdown a lot harder for these people.

In these situations, people under financial stress are a lot more vulnerable to making bad financial decisions, which may lead to debt and further stress that impacts on overall wellbeing, particularly mental health.

What are the impacts of financial stress?

The problem is cyclical. Worrying about money makes mental health worse and poorer mental health makes managing money a lot harder.

Research from the Money Advice Service, states that one in five (21%) of UK adults say they’re worried about money and debt, with many saying that their mental health has deteriorated as a result of these worries [3]. The research goes on to state that people experiencing financial difficulties are more likely to feel anxious and depressed, and that we lose 46 minutes of sleep a night to money worries.

One in four workers say that money worries have affected their ability to do their job [4].

What’s needed is better financial resilience so that when faced with unprecedented situations such as these, employees are not so vulnerable to financial stress. The reason we all go to work is to earn money to live. As an employer, you can help your employees improve their financial resilience.

How do you help employees become more financially resilient?

The 2020 CIPD Health and Well-being at Work report [5] found that employee health and wellbeing activity is least focused on financial wellbeing, yet mental health is the most common priority. As we’ve shown, the two are inextricably linked. Alleviate financial stress by improving financial resilience and you’ll have a more productive and engaged workforce.

In our research, 88% of the senior HR and benefits professionals we surveyed believe it’s their responsibility to provide support on financial wellbeing for their employees. And 86% of employee respondents with financial concerns said they would take up financial support from their employers.

Financial education

Start with the basics. Employers must support financial literacy, and the signs are that many are beginning to realise the importance of this and put in place financial education measures for their employees.

There are many ways that you can provide financial education to your employees. You might choose one of the many outsourced providers that specialise in the field or you can ask for support from experts within the organisations that already provide your financial benefits, such as your pension provider, mortgage advice service, debt management provider and savings partner. It could be the basic facts all the way to providing information about investing.

Research shows that 31% of employees would feel less stressed about money issues if they had access to financial education [6]. Which means less time spent worrying about money issues at work.

Not one size fits all

Every employee is different. They’re at different stages in life and have different goals. Their financial circumstances are completely different. That’s why you need to take a multipronged approach to your financial wellbeing strategy. From education to support with buying a first home, to raising a family and retiring – and all that comes in between or that often differs – your employees have different financial goals.

For a long-time pensions have been the focus when it comes to employee financial wellbeing. But the roadmap from birth to retirement is no longer as simple as it used to be, when pensions were king. Now, people have to work far longer into life, they have to support family members until a much later age, they have aspirations other than getting married and having kids and settling down.

Pensions are extremely important. But now, affording to buy a first home is a lot more difficult, so many younger employees are focused on this and not the pension – yet both are important. So, giving your employees access to a wide range of financial tools is extremely important. Take the Lifetime ISA (LISA). The LISA replaces the Help to Buy ISA and let’s 18-39 year olds save up to £4,000 per tax year for their first home or retirement, tax-free. The best bit about it is the Government give you an additional 25% bonus on your savings. For those employees struggling to get on the housing ladder, being able to save into an account such as a LISA straight from pay will help them achieve their financial goals and reduce the inevitable stress that comes with lack of control over future.

The key point is helping employees build up a healthy savings pot so they’re able to support themselves through a sudden loss of income and change in circumstance. Right about now, pensions are no use to those who have lost jobs or face uncertainty around their future employment. What would help them is having a savings pot they can access for times like these.

Empathy and communication

Remember that your employees are what keeps your business running. Be open about providing support. Many companies are focusing on mental health, which is fantastic, but remember that financial stress also has an impact on mental health. And often people find it very difficult to talk about money – even with their families. Make it clear that you are there to provide support and signpost the different options available to them.

Work with your existing financial partners to provide ongoing communication. This isn’t just a one time, once a year education session. It’s keeping the lines of communication open and giving employees access to the help they need throughout the year.

To talk to Smarterly about the benefits of providing a range of tax-free savings solutions for you employees, please get in touch.

Sources

(1) Realigning the workplace savings offering to meet the needs of millennials, 2019

(2) https://themoneycharity.org.uk/money-stats-march-2020-portrait-pre-crisis-uk/

(3) https://www.moneyadviceservice.org.uk/en/corporate/money-on-the-mind--a-nation-feeling-the-cost

(4) https://www.cipd.co.uk/knowledge/culture/well-being/employee-financial-well-being

(5) https://www.cipd.co.uk/Images/health-and-well-being-2020-report_tcm18-73967.pdf

(6) http://hrnews.co.uk/uk-employers-falling-short-on-financial-education-shows-new-research/

Smarterly does not provide financial advice. Investments may go down as well as up.

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