Money does not necessarily make people happy. Financial stress can make people unhappy. Financial anxiety can reduce wellbeing and stop people from flourishing in their life and work.
It’s a sad reality that 77% of UK workers face. A study by the charity Mind shows a strong link between mental health and money.
Stress is a vicious cycle that needs to be broken. It’s good to know that employers are beginning to step up and offer valuable support.
Why saving money is important
Let’s first look at it from a psychological perspective. When we consider the opposites of stress and anxiety, we are really talking about consistency, assurance, predictability and clarity. In stressful times, people tend to cling on to these things because they are in opposition to the uncertainty that causes anxiety, reduces well-being, and hinders performance.
Employers must make it a priority to empower their employees with the tools they need to save and budget. Savings in the bank give people more freedom and control. The psychological comfort that comes with having a financial cushion can relieve stress by itself. 30 percent of UK adults do not have any savings.
Payroll savings schemes allow employees to create a fund of resilience by automatically setting money aside as they earn. The funds are deducted from the salary before transfer. This makes it easier for employees to save. According to Money & Pensions Service, between 55 – 72% employees prefer this method of employer-sponsored saving.
Close the Financial Skills Gap
In a recent study HR leaders suggested that employers could do more to fill gaps in the state-run health care system. This is an interesting idea and it’s one that’s similar to organisations taking a more active part in their employees’ financial well-being.
Financial stress is not only harmful to wellbeing but also affects performance and productivity at work. Financial wellbeing has become a priority for employers and an obligation. The cost of living crisis and cultural change have led to a greater openness among employees about their finances. All of this is progress, no doubt.
What else can employers do to help? What practical steps can organisations take to reduce financial strain, improve wellbeing, and empower employees to achieve their full potential in the workplace?
Inform employees of the resources available.
The CIPD reports that less than half of employees (45%) who are eligible for financial wellness support actually use it. This is a shockingly low rate, especially considering that 45% of employees who are financially stressed lose sleep due to their situation. Why aren’t there more employees who take advantage of the financial assistance that is offered?
It is not a question of appetite, but rather one of knowledge. Benefits for financial well-being are only available to employees who know about them. HR leaders have a great opportunity to improve their financial wellness communications and ensure employees are aware of the many benefits available.
This means that employees should be directed to trusted third-party resources, such as moneyhelper, a government-sponsored website that offers free and impartial financial assistance.
Use technology to improve financial literacy
AI plays a key role in this.
Employers can use AI-powered payroll technology to help employees understand their pay and benefit, so they know what to expect from their pay packet. Chat interfaces are used to create intelligent payslips that allow employees to view digital explanations for each element on their payslip. This includes student loan repayments and tax codes. It also includes pension and National Insurance contributions.
It is important to have instant access to information that provides assurance and clarity. As humans, this is what we need in order to feel secure financially (and mentally). Eight out of 10 UK employees don’t fully understand their pay slip, so a large part of the solution is to reduce the uncertainty around pay that causes financial stress.
It all comes down to the control factor. The employees may not have control over their household expenses or rising costs, but with the help of their employers, they can regain control by gaining a better understanding of finances and making more informed financial decisions.
Support psychologically and practically
Only 20 percent of UK employers offer a financial well-being policy or benefit package. However, the companies that have one report higher employee satisfaction. 60% say that their employers are doing enough for their financial well-being in companies with policies, while 28% say the same about their employers without a policy. Financial wellbeing gives employees a psychological boost whether they use it.
It is important that employers provide both practical and psychological support to employees in financial crisis. Earned wage access, also known as flexible pay, can be a lifeline for employees in financial distress. It allows them to withdraw a portion of their earnings prior to pay day and avoid credit card debt or high-interest loans. Over one-tenth of UK employers offer some form Earned Wage Access. This number is expected to increase rapidly throughout 2025 and beyond.
Employers can improve employee financial well-being by following these simple steps. This will increase engagement and productivity. It is now clear that the need to bridge the financial well-being gap has been proven. It remains to be determined which organisations will seize this opportunity to improve business and people performance.
