Research: financial wellbeing will become more crucial than ever in 2021
Over the course of the pandemic employees’ mental wellbeing has quite rightly been the main focus of employers’ attention. However, as the restrictions continue and many employees remain on furlough, reduced working hours or have sadly lost their jobs, the financial outlook for many is daunting.
Earlier this week the Trades Union Congress (TUC) released its latest findings into the impact of the pandemic on household finances. The figures were stark. More than a third (37%) of workers said that their household had suffered a reduction in disposable income since the pandemic began. This rises to half (50%) of workers with annual earnings below £15k, while just three in ten (29%) workers earning more than £50k have been impacted.
So what is the true state of employees’ financial wellbeing and what can employers do to help?
The big picture
A key source for understanding the financial health of UK employees is the Joseph Rowntree Foundation’s annual Poverty Report.
Before coronavirus, 14.5 million people in the UK were caught up in poverty, equating to more than one in five people. In-work poverty had been on the rise for several years and some groups were disproportionately likely to be pulled into poverty. Many of those groups are already struggling to stay afloat – such as part-time, low-paid workers, as well as lone parents and those from Black, Asian and minority ethnic households – and have borne the brunt of the economic and health impacts of Covid-19.
Although it is still not clear how poverty levels have been affected due to the pandemic, poverty levels are expected to increase, especially if government support is removed from April 2021.
The pandemic has also had an impact on the National Minimum Wage (NMW). The Resolution Foundation’s 10th annual Low Pay Britain report focuses on the coronavirus crisis: its impact on the low paid, and what this means for minimum wage policy. It found that given the economic impact of Covid-19 the NMW would not be able to increase by as much as originally forecast.
The Low Pay Commission’s 2020 annual report confirmed that it would be unable to maintain the ‘on-course rate’ to meet the government’s pledge to ‘end low pay’ by raising the National Living Wage (NLW) to £10.50 an hour by 2024. And so it recommended (and the government accepted) an increase in the NLW to £8.91, which is 2.2% or 19p. This is lower than its best estimate of the on-course rate of £9.06, and therefore represents a significant adjustment in response to economic conditions.
Supporting employee financial wellbeing
For low earners in particular the pandemic has had a hugely detrimental impact, and with minimum wage raises slowing this year, an increasing number of them will be facing financial difficulties and will potentially fall into debt.
Supporting employees’ financial wellbeing can be achieved in a variety of ways, from offering benefits such as access to workplace loans or credit unions, through to introducing financial education, guidance, advice or even budgeting tools and discount schemes.
Lemonade Reward recently launched its paper: Getting to the heart (and the money) of employee wellbeing, which provides an easy-to-follow, step-by-step guide outlining a solid business case for workplace financial wellbeing.
In October 2020, the Challenge Chairs who advise the Money and Pensions Service (MaPS) on the UK Strategy for Financial Wellbeing released recommendations on building the UK's financial wellbeing in the light of Covid-19. The response document details how MaPS and others will deliver support to build a financial wellbeing movement from 2021 onwards.
Looking beyond financial wellbeing
Although there are many things that employers can do to support the financial wellbeing of employees, one of the most fundamental actions is to increase pay and offer secure employment. The Living Wage Foundation has long advocated that employers pay the ‘real’ Living Wage which is calculated against the cost of living.
These actions are similar to those called for in the TUC’s impact of the pandemic on household finances report, where it urges the government to make greater use of fiscal policy to support the economy. It argues that by increasing support for working people – by extending the job retention scheme, implementing a wage floor to prevent the retention scheme from paying below the minimum wage and increasing statutory sick pay – the Chancellor would be using fiscal policy to protect the economy and stimulate recovery.
Whatever the next few months hold, it is clear that many employees’ financial wellbeing will be at risk. It’s up to employers to decide how to tackle this growing issue.
All of the reports mentioned in this article are available in REBA’s reports section.
The author is Dawn Lewis, content editor at REBA.
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