Jonathan Watts-Lay, director at WEALTH at work responds to key findings from Reward’s research and considers the best course of action HR teams can take to help employees struggling with finances
A quarter of respondents say that they provide financial education for employees as they reach retirement, and 22% provide education for staff struggling with debt problems. But there is very little support for financial education at any other point in an employee’s life. How can employers extend out the range of financial education that they currently offer?
Financial education is important in helping employees to make informed decisions throughout their career and later on in life.
But before delivering any financial education programmes it is important to consider what employees need to know.
For example, when they first enter the workforce employees will need to understand everything from deductions on their salary such as tax, National Insurance and pension contributions through to the benefits offered by their employer.
It is important that employees regularly review their financial position so ongoing financial education at different life stages can be important. For example, those who may have been in work a number of years will need to understand if their pension savings are on track or whether they need to consider changing contribution levels to meet their retirement goals.
Ten years out from retirement there’s an opportunity for employers to help employees understand their retirement income options and whether they are likely to want to go into drawdown or buy an annuity, and therefore put them on the right investment strategy for that glide path.
As well as life stages, there are annual events to consider. For example, the annual window when employees must decide what benefits they would like to take for the coming year.
Research shows that often benefit take-up can be really low. In such circumstances, employers should assess whether it is because employees do not understand the value of the benefits or whether the benefits are unsuited to the workforce, and act accordingly.
60% of respondents in the survey do not analyse their workforce to understand their financial education needs, and 81% do not have a formal financial wellbeing strategy. How can companies get started when it comes to introducing financial wellbeing and analysing the workforce?
We have conducted focus groups with different cohorts of employees in the past and often the starting point is to talk through the existing benefits that are available, because you would be amazed at how many employees do not understand what’s on offer in the workplace.
We characterise different financial wellbeing initiatives as ‘push and pull’ strategies. There are certain benefits that reward teams may want to push out to employees to make sure they really understand them. A good example of a push strategy might be the launch of a Save As You Earn scheme. Employers should explain what the scheme is, how it works, and what the benefits are so employees can decide whether to join the scheme.
Pull strategies probably work better on issues like debt management because you can’t really go out and say to your employees, ‘Oh if you’ve got some debt problems let us know,’ because it’s a bit too personal. In this case, it’s better to make digital resourcing available - so it might be simplistic steps that they could take themselves, like debt consolidation of credit cards, through to more serious support, such as debt counselling.
88% of respondents said that they have an employee assistance programme (EAP) with debt support. What are some of the pros and cons of an EAP as a form of financial wellbeing support?
EAP systems should be a safety net, rather than the first thing offered to an employee. Wellbeing strategies should be preventative; they should help employees identify if they have an issue with debt and signpost resources available. EAPs should be there if everything goes badly wrong.
Research shows that individuals with financial stress are less productive. As the EAP is often a last resort, there is a good chance the business has already suffered from a lack of productivity. Therefore, there is a commercial argument in favour of helping employees before they reach the point where they need an EAP.
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