Money troubles have been on the rise for years – but with vulnerabilities expected to worsen due to COVID-19, it’s more important than ever to tackle financial wellbeing in the workplace.
Over the last three years, in their employee wellbeing strategies, UK businesses have given much greater prominence to the financial wellbeing of their people. For those of us that monitor the wellbeing landscape, this has come as no surprise. It’s been estimated that the financial problems of employees cost a business four percent of productivity, so it’s in the interest of employers, just as much as employees, for businesses to provide financial wellbeing programmes.
A growing problem
The evidence has been long been mounting, that personal finances in the UK are in trouble. Back in 2012, the numbers of people in poverty who were in work, exceeded, for the first time, those who were unemployed and that has remained true ever since. And in 2017 The Resolution Foundation provided an explanation of why so many were struggling. The preceding decade had seen the slowest wage growth since Napoleonic times, whilst basic living costs, especially rents and mortgages soared. The extent of the financial malaise became more apparent when a YouGov survey found that one in three people deemed to be on middle-class incomes, couldn’t find £500.00 to fund an emergency expenditure without borrowing – giving lie to any lingering belief that financial worries were the preserve of the poorest in society. And in 2019/20 financial specialists Neyber found that 52% of employees were having to borrow to pay day-to-day living costs.
Clearly, many people’s finances were precarious, with large numbers having little in the way of a financial safety net. Indeed, in 2018 an RSA Populous survey found that the finances of seven out of 10 employees in the UK were in a parlous state, leaving them vulnerable to an adverse turn of events. And that duly came to pass with the global coronavirus pandemic.
It’s not easy to generalise about the impact of the pandemic on the finances of the population as a whole, though a great many are in difficulty. It may well be true, as some commentators suggest, that the pandemic is going to widen inequalities, as the lower paid suffer disproportionately. ONS data seems to support this, with more people on the lowest earnings reporting reduced income, less opportunity to work and being less able to save. On the other hand, one in six people have been able to add to their savings and this is likely to reflect the greater job-stability and therefore income, of those on higher earnings.
Individual circumstances do matter here. The finances of young people have been hit particularly hard. Typically, they have fewer savings and spend a larger proportion of their earnings (58%) on life’s essentials. And parents with children at home are especially pessimistic about their financial future. The majority of them believe the pandemic has caused long-term damage to their finances, with over a third feeling that they will need to make sacrifices for six to 12 months after the ending of lockdown. And, of course, the cycle of the crisis still has some way to run, with economic indicators pointing to more job losses ahead as businesses retrench and adjust to the new realities. Knowing this, people currently furloughed are especially pessimistic about their prospects and their financial futures.
There is also a vicious circle at the heart of all of this and it centres on the well-documented relationship between financial problems and mental health issues. The pandemic has already been very heavily researched and the mental health of employees has come under great scrutiny. The evidence suggests that their mental health has taken a big hit for a variety of reasons, with financial worries being one of the biggest contributory factors. And the problem with that, is that poor mental health leaves people less well equipped to perform well in their job but also less able to manage the other complexities in their lives and to adjust to whatever the post-pandemic world looks like.
At the Bank Workers Charity, through our work supporting the wellbeing of current and former bank employees, we see, on a daily basis, how these financial and psychological trends, translate into real life hardship. During the pandemic we have seen the often profound impact on personal finances when employees, or their family members, lose their jobs, are furloughed or are forced to reduce their hours. The disposable monthly income of the average household is predicted to fall by £515.00, leaving a gaping hole in the family budget and this will force many to seek help, as they find their finances stretched to breaking point.
One of the biggest hurdles people face in accessing support is the stigma associated with having financial problems. This means they’re often reluctant to seek help until their finances are in dire shape, when doing so earlier would have made their situation much easier to address. We see this particularly in our own community, the banking sector, where there appears to be an additional sense of shame attached to working for a bank and appearing not to be able to manage money.
And that’s why it’s important for businesses to break down that stigma through their financial wellbeing programmes, and help those in financial distress to see things differently. Data from the debt charity StepChange shows that three quarters of the clients they helped, got into debt through life events, or an income shock such as redundancy, serious illness or a separation or divorce – things that could happen to anyone. And that needs to be better understood to stop people equating financial difficulties with fecklessness or irresponsibility with money.
With so many employees’ finances on a knife edge, it’s important for businesses to use their financial wellbeing programmes to encourage them to seek help early. Right now, webinars on financial wellbeing are a great way to do that. That’s because employees, the majority of whom are still working from home, have a little more discretion in how they manage their time and can more easily accommodate webinars within their work pattern. Important also, to be highlighting some of the excellent sources of support that are available if people are struggling. The Money Advice Service, Stepchange Debt Charity and MoneySavingExpert all have fantastic resources on their websites, addressing the different problem scenarios that the pandemic is throwing up.
During the lockdown, it has been reassuring to see that, alongside all of the emergency measures companies have had to take to keep their business afloat, they haven’t lost sight of the need to focus on the wellbeing of their employees. At this moment in the crisis, it’s their financial wellbeing that most needs attending to.
The Bank Workers Charity website contains a range of material and interactive tools to support wellbeing.