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27 Nov 2020
by Heidi J Allan

Top reasons for financial stress and how to mitigate them in the workplace

Even before Covid-19, financial stress was widespread among the UK’s employees. Our Employee wellbeing – the state of the nation’s health research, which surveyed 10,000 employees before the pandemic, revealed:

  • 21% of employees are stressed about money;
  • 51% have less than 3 months’ salary in emergency savings (this is widely recognised as a necessary financial buffer);
  • 18% have no emergency savings.

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Add on to this analysis by the TUC that household debt (ignoring mortgages) reached a record high of an average of nearly £15,000 in January 2020 – it is likely that things have gotten worse since the start of the pandemic, as families struggle with additional financial stresses.

We all know that poor financial wellbeing has a major impact on overall work productivity – extra stress is a clear cause of poor work performance, higher sickness levels and higher turnover as employees chase alternative roles.

More and more companies have woken up to this link, and are taking actions to improve the financial wellbeing of their employees. And action doesn’t have to cost much to have a significant benefit – so as well as “doing the right thing” providing financial wellbeing is a good investment in your employees.

A lack of savings

One of the top reasons for financial stress with employees is a lack of emergency savings.

If you don’t have emergency savings, of at least a few months’ salary, then this can be very stressful when something happens – your car breaks down or your washing machine breaks. If you can’t fix things quickly, that can be stressful.

People without savings also tend to worry about what if something did go wrong, as they know they are living day to day and don’t have any financial buffer.

The last few months may have seen households dip into their emergency savings as people were on reduced salaries, furloughed or partners may have lost jobs. A lack of savings can cause persistent debt. If you don’t have emergency savings, when something unexpected comes up, people tend to borrow money. Repaying that debt, means people are even less able to save in the future, creating a spiral. And if their credit history is not good, debt can be very expensive eg credit cards, overdrafts or payday lending.

So what can employers do to help?

Employers can provide practical support

Employers can offer access to good, clear financial education (videos, seminars etc) as well as some helpful tools to help encourage employees to both get their day-to-day and debt repayments under control, and then build the emergency savings buffer that is so critical to reducing financial stress.

These don’t need to cost very much, and can include:

  • online and face-to-face education that focuses not just on information, but on behavioural changes such as automated payments;
  • promotion of government-backed schemes such as Help to Save and Lifetime ISAs;
  • salary-deducted saving schemes, sometimes with a boost from an employer for long-service or positive work appraisals;
  • use of trusted apps to help promote good behaviour such as round ups, savings jars and automated savings;
  • communication campaigns to reduce the stigma around money worries.

The right solution for your organisation will depend on the needs of your employees and their base level of financial knowledge and wellbeing. There is no one-size-fits-all approach. Instead, take the time to really understand the financial stressors affecting your teams and make a plan, or work with a trusted third party to address these concerns.

The author is Heidi J Allan, senior financial wellbeing consultant at LCP.

This article is provided by LCP.

In partnership with LCP

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