Financial Wellness Report
Achieving Financial Wellness
In Collaboration with Manchester University and Prof. John Hoffmire
What is financial wellness?
What is financial wellness?
A recent survey found that 67.6% of people didn’t know what ‘financial wellness’ meant. This is a worrying figure and one that shouldn’t really exist. Change is needed.
John Hoffmire, a chairman of the Personal Finance Employee Education Fund, bats away the jargon and describes it like this: “My belief is that many people are hurting financially. They need to make changes. But, it is also the case that two people could have exactly the same financial situation and one would be financially well and the next person would be financially unwell. Financial wellness is not about how much money you have, it’s how you feel about the money that you do have.”
Dr Pauline Prevett, a senior lecturer and expert in financial literacy at the School of Environment, Education and Development, University of Manchester offers her take: “It’s not a neat, single concept. It encompasses financial attitudes, confidence, self-efficacy, financial literacy, financial behaviour — it’s more of an umbrella concept. However, you could think of financial wellness as being a state of living whereby monetary concerns are not a source of anxiety.”
Essentially, a person’s financial wellness is a huge and integral part of their life, and has the possibility to cause drastic repercussions for not only themselves, but also their employers. To reinforce the issue we’re all facing, let’s look a little deeper into the problem.
John Hoffmire, Chairman of the Personal Finance Employee Education Fund
Too busy to read? Click play to listen to audio version of the Financial wellness report
An employee’s overall happiness can be divided up into three distinct areas, or a triangle of sorts: physical wellness, mental wellness and financial wellness. The aim is to keep each segment in the green, as much as possible.
However, when things start creeping into the red, it’s a cause for concern. Dr Prevett says, “To the individual, financial wellness is important because it’s part of overall wellness. If someone is financially in trouble and therefore becoming anxious or depressed, there is a knock-on effect on their mental health. It can limit the kinds of things a person could be doing with their life”
For example, employees spend an unfortunate amount of office-time on their own financial problems — this is time spent not doing work — and the poorer their financial wellness, the more time it takes out of their day. Dr Prevett continues, “This can have a huge impact on an employer — there’s a massive amount of days lost due to mental ill health in the workplace.”
Reasons for this include but are not limited to: low morale, decreased productivity, unexplained absences — one Manchester University student we spoke to even developed anaemia as a result of their money worries. This is a catalogue of predicaments that are tough to remedy.
Alistair Dornan, head of Health Management at Capita, reiterates the dangers inherent in poor employee wellness, stressing that employers need to “realise that it’s actually to their benefit to have financially healthy employees. The research shows that when employees are not in good financial health, it costs the employer way more than a good financial literacy or financial wellness program would cost them to provide.”
Poor wellness can lead to a wealth of complications.
There's a growing number of employees who are ‘just about managing’ from month to month (the JAMs). This group is growing in size and relevance, and it's very easy for employees to find themselves within this group. It's also increasingly difficult for them to find a way out.
To place this term in the real world, let’s look at the numbers. A study found that 37% of employees worry about how they’ll get through the month with the money they or their partners earn, with 26% actually seeing that worry materialise by struggling to pay their living costs each month. 40% live from payday to payday, 36% have lost sleep about it and a shocking 21% need to borrow money on a regular basis. These are sobering statistics that highlight a situation that’s often overlooked — thankfully it’s also one that employers can positively impact.
So how does all this affect the employer directly? Well, according to our study, 59% of employees with ‘current’ financial worries state money concerns prevent them from performing their best at work. This is the crux of the matter, right in at the nucleus — if your employees aren’t working at their best, is your business really working at its best?
Alternatively, if we look at the admittedly concerning bigger picture — financial stress costs the UK economy £121 billion in lost productivity every year. That’s a significant figure and it clearly shows that something needs to be done.
It's not all bad news, though. We're partnering with employers to tackle poor financial wellness and provide a solid solution.
...59% of employees with ‘current’ financial worries state money concerns prevent them from performing their best at work.
What does this mean for your employees?
What does this mean for your employees?
We’ve carried out extensive research to understand the current problem in more depth and have found that it’s not merely a simple few who are feeling the weight of monetary burden on their shoulders, it’s the majority. Our research, for example, found that over half of the respondents found it difficult to effectively manage their money — this represents a lot of financial worry and stress in your workplace. Without a direct intervention it's not going to improve any time soon.
Add to that a worrying 71.4% admitting that they felt in the dark with regards to their personal money management, and the dearth of information available to employees is quite evident. Employers therefore have a great opportunity to shine a light on the darkness and offer indispensable help and guidance.
It’s up to you, as an employer, to shine a spotlight on the darkness.
John Hoffmire agrees: “Right now a quarter of employees across this country are putting off key decisions because they just don’t feel like they have enough information. So when employers provide financial wellness services or financial literacy help in the workplace, it helps employees make decisions.”
In addition, consider this: our survey found that 81.4% of employees actively want their employer to provide financial education as a business benefit. So not only is there a business benefit to improving employee financial wellness, there is also a growing appetite from employees themselves.
Dr Prevett backs this need for employee assistance, “For any large employer I think it’s really important — just as important as offering services to do with occupational health, such as counselling or retirement courses.” We can duly feed this need and are excellently placed to provide the tools, skills and resources needed to successfully change the picture.
"Right now a quarter of employees across this country are putting off key decisions because they just don’t feel like they have enough information."
Why Capita’s financial wellness tool?
Why Capita’s financial wellness tool?
In order to reflect a changing landscape we undertake an annual employee study, the most recent of which found that 66% of employees want their benefits offering to reflect their personal needs, in other words — a gym membership is fine, but fully-rounded financial wellness support is far more important to their overall wellbeing.
Specifically, a number of key areas were highlighted as fundamental: 48% of people wanted to learn to save more for retirement, 31% needed a better understanding of overall income, 22% wanted to learn to live on a budget and 21% required the specific skills needed to manage and pay off debts. It’s a wide range of support to provide, but each element is required to stitch together a healthy overall state of financial wellness.
Not only that, but as employers start to understand the importance of the need for good financial literacy services, more and more businesses are incorporating financial wellness products into their core benefits offering. Join the charge and ensure that your business and employees aren’t left behind.
More than a quarter of companies plan to add financial education or guidance to their health and wellbeing strategy over the next 12 months and almost half of them plan to do it over the next few years.
A recent survey by the Reward and Employee Benefits Association (REBA) proved this uptake by asking employers about their plans in relation to financial wellness, and they found many positive changes in the sphere. More than a quarter of companies plan to add financial education or guidance to their health and wellbeing strategy over the next 12 months and almost half of them plan to do it over the next few years.
The reasons for this are obvious — there’s evidence of a distinct correlation between financial wellness and the direct employee costs involved in lost productivity, absenteeism and other related symptoms of poor financial wellness. Our dynamic financial wellness tool can fix this by easily featuring as a core offering in your proactive approach to positive employee wellbeing, thereby addressing poor financial wellness before it even becomes a problem.
How does the Capita tool work?
How does the Capita tool work?
To explain it fully, it’s easiest to break the service down into five distinct stages:
Employees complete a simple and quick online survey that assesses their current level of financial stress. The questions are designed to build an overall picture of the respondent’s financial health, for example “How often do you worry about being able to meet normal monthly living expenses?” and “How confident are you that you could find the money to pay for a financial emergency that costs about £1000?”
Once completed, employees receive a personalised rating from the internationally-recognised Personal Financial Wellness scale (PFW). This rating is then compared to peers in similar demographic groups so they’ve got an idea and understanding of where they sit in the grand scheme of things, and whether there is cause for worry.
The interactive tool will then provide personalised, easy to digest and impartial education that’s relevant to the employee’s level of financial stress and individual information. We’re not talking a list of tiresome leaflets to skim through here — this is specifically-tailored guidance from The Money Advice Service (MAS), based on the individual’s PFW and answers to their survey questions. For example, it may focus on specific ‘life events’ that are relevant to age, like buying a house or having a baby. This way, it means that the information is always relevant, always easy to understand and always to the point.
The tool identifies the key areas in which the employee may need help, and allows them to tackle them one by one, offering detailed information on subjects such as dealing with debt, improving their credit score, planning for retirement and saving for an emergency. The list is exhaustive and the advice is comprehensive, current and covers a broad range of life events and financial situations.
Dr Prevett believes this is the best route forward: “It’s about getting that control — getting someone to spend the time to look at and manage their finance and get them into good habits. It’s more of a particular type of education that seems to work, rather than a ‘roll-out’, same-thing-for-anyone approach.”
Perhaps the most important destination; the tool will subsequently point them in the direction of resources relevant to their situation.
Of course, there are existing services to help with money concerns — debt consolidation programs or saving vaults, for example — but our tool makes sure the advice and information is part of a balanced and coordinated approach. We bring together each element as part of an overall financial management strategy. There’s no use in an employee signing up to a service if it’s of no relevance to them — there needs to be reliable education backing up these decisions.
Or to reiterate, Dr Prevett notes, “It’s important that it’s education that is person-centred — there’s no point talking to somebody about buying a house if they’ve already bought one...”
As such, we have partnered with highly-respected brands such as the aforementioned MAS, who provide money dashboards for helping with everyday budgeting; Neyber for payroll loans and Capita’s Digital Countdown to Retirement (DC2R) for guiding employees through the confusing world of pensions. We’ll also highlight existing products offered by the individual's current employer, like employee assistance programmes, risk benefits, employee network groups and share schemes. We'll even highlight bargains and savings for their next shopping trip — it all adds up!
The difference is that when we direct employees towards a solution for managing their financial wellness, there’s personalised reasoning behind the advice. Crucially, a rounded, proactive and strategic approach that touches on the life events of each employee whilst taking account of the external landscape, is far more effective and useful than a singular, slap-dash approach.
“How confident are you that you could find the money to pay for a financial emergency that costs about £1000?”
The final stage is one that is very easily neglected and a lack of focus on it can negate everything that came before. Essentially, the last section of the toolkit focuses upon helping the employee to embed the new skills they've learned and the information they've accessed into positive financial habits.
Think of the education and action stages as a complete overhaul — much like a healthy diet, it’s important to stick to these changes otherwise there’s a huge chance of a relapse. Bad habits can seep in and undo all the hard work, causing the employee and employer to land firmly back on square one. Keeping everything in check on a constant and ongoing basis means that everybody’s overall health is maintained long into the future.
Employees are therefore encouraged to complete the online survey regularly, or if their financial situation changes, ensuring that the information and education stays relevant and provides the best ongoing wellness outcome. It’s the beautiful end-goal.
The stats speak for themselves — poor financial employee wellness undoubtedly spells big problems for a business. The cost of providing relevant, timely and personalised financial education and services via our financial wellness tool is significantly less than the overall cost of taking no action. Neglecting this can impact your business, your employees and your reputation as an attractive employer who priorities employee wellbeing.
As such, it's a great time to partner with us. We'll use our market-leading expertise to provide a solution that is proven to make a positive difference to the financial wellness of your employees. Through our guided learning and long term planning, employees will feel more confident in the financial decisions they make, helping them tackle today and plan effectively for tomorrow.
We recently supported Sky to provide them with a benefit model for their workforce — back in 2014 we rolled out a personalised service to make Sky’s employees’ lives easier and their financial worries a thing of the past.
As a result of our partnership, Sky’s salary sacrifice savings have increased by £460k since 2016 and a 2017 employee survey showed that employees see the Sky benefits offering as having a positive influence on whether they initially joined Sky and why they chose to stay at Sky.
Financial wellness is not a buzzword, it’s not groan-inducing business-jargon, it’s a real issue, and the numbers speak for themselves — if kept unchecked it can cause a wealth of problems for a business. As the market currently stands, the importance of mental and physical health for a workforce is well-documented and in most cases, employers understand the crucial role they play, but underestimating the relevance of financial wellness is to miss the last piece of the puzzle.
Partner with us and we'll help put that missing piece in place.