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Financial wellbeing and staff benefits: moving beyond pensions

Published 8th June 2017 by Investors in People
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In the past, pensions may have been all organisations offered towards financial wellbeing for employees. But this is changing for two reasons.

Firstly, the financial pressure on employees is increasing, because of caring responsibilities, rises in the cost of living and housing and a need to save money earlier in life to fund retirement.

Secondly, the evidence supporting a link between poor financial wellbeing, happiness and productivity is growing. A US study found that employees with money worries spent 13% of their day dealing with these worries.

Meanwhile, research from Neyber suggests 17.5m days are lost per annum as financial worries contribute to stress levels and poor sleep.

Organisations are therefore taking action to address financial wellbeing with a much broader agenda. Here are some strategies and ideas that you can follow.

Financial wellbeing: 5 ways to move beyond pensions

Offer financial security blankets

Financial security is a core part of financial wellbeing. Instability, uncertainty and not being able to meet short-term financial demands can lead to stress, spiralling debt, an inability to concentrate at work and depression.

Organisations can help contribute to employee financial security by making their future more certain. Health care cover makes future routine medical payments more stable, while season ticket loans allow employees to spread the cost of a major expense and ensure it doesn’t impact their cash flow in one fell swoop.

Organisations can help contribute to employee financial security by making their future more certain.

Loan consolidation is growing in popularity because it helps employees better manage their debt and reduce the chance of it spiralling further.

Focus on the big life expenses

Goodman Masson introduced a contributory mortgage fund: employees contribute up to 20% of their annual salary via salary sacrifice to the scheme and after three years, the firm will top up the account by 33%. Any bonuses added to the scheme will be topped up at 50%.

This scheme is useful to homeowners only, which cuts out a wedge of Goodman Masson’s workforce. However, they offer a similar scheme for those with student loans: after three years, the company will top up employee contributions by 50%. This allows the organisation to focus on the big expenses at different life stages, giving broad appeal across the workforce.

For parents, childcare is a big issue, and many parents find that when the mother returns to work they aren’t financially better off because they have to pay for childcare. As part of a scheme targeting the big costs at different life stages, organisations could focus on helping reduce this burden for parents.

Offer savings portals but market them the right way

Employee benefits portals offer employees savings on a huge range of purchases, from household expenses like food and utilities to electronics. Organisations have two ways to market these: as ways to get discounts on discretionary purchases, or to reduce the cost of living.

The former may encourage greater spending as employees feel they are ‘saving money’ or gaining an edge. The latter is a healthier way to promote these platforms because it encourages employees to save money on the expenses they already have.

That’s not to say these platforms aren’t ways to save money on the types of discretionary purchases that are already part of an employee’s lifestyle, but financial wellbeing and moving towards a good balance between spending and saving should be a key outcome of implementing and marketing a portal.

Re-market your non-financial benefits to educate

Many organisations break their employee benefits packages into financial and non-financial benefits. Free coffee, fresh fruit, home working and free parking are marketed as non-financial benefits but creates the wrong impression because these are actually financial benefits.

A good financial education programme will combine material around shifting mindset and behaviours with practical steps that can give people's financial wellbeing a positive 'nudge.'

Marketing your free, ground coffee as a financial benefit may help employees think twice about their daily cappuccino habit at £2.50 a day. This costs - assuming 40 working weeks in a year - £500 a year. That’s a lot of money that can be saved by having the coffee at work instead.

The same is true of home working. One day working from home a week, assuming a daily commuting cost of £5 and a 40-week year, equals a saving of £200 a year.

These are just two examples of the financial savings possible through ‘non-financial benefits.’ Helping employees see the financial consequences of lifestyle choices, so they make small changes that make a big difference to their financial wellbeing, is a key part of financial education.

Offer a diverse financial education programme

Financial education is a tough nut to crack because everyone has very different financial concerns and needs. A good financial education programme will combine material around shifting mindset and behaviours with practical steps that can give people's financial wellbeing a positive 'nudge.'

In terms of mindset, educating people about future focus is important. The key to long-term financial wellbeing is seeing the long-term picture and not making short-term decisions that affect future financial stability. Building a story of what it feels like to be on top of finances can be empowering and lead to ‘light bulb’ moments.

As a practical step, using mobile banking can help employees keep on top of what is going in and out of their accounts and check balances before making purchases. You can also set up ‘quick savings’ to transfer money into savings accounts without logging in. This can help build positive habits and habits are a key part of improving long-term financial wellbeing.

Using budgeting software - widely available in app-form - is another practical step that can help employees shift towards proactive financial planning. Most budgeting software is sophisticated and offers tools for different needs (expenses tracking, money spent on food) and can help individuals see how lifestyle choices impact their finances. Options include Pennies and YNAB.