Financial wellbeing: supporting employees as living costs rise

Inflation is at a 30-year high and household finances are under increasing pressure. With one in four employees saying that money worries affect their ability to do their job, how can employers support their workforce through the cost of living crisis?

Organisations need to start offering greater financial wellbeing support to their workers, according to the CIPD, the professional body for HR and people development. Besides doing their bit as a responsible employer, this will help them stand out amongst potential new employees in today’s tight labour market.

Nearly one in five employees (19%) believe their employer is not doing enough to support their financial wellbeing, according to new research by the CIPD.

In fact, some are simply not earning enough to get by. Around one in eight (12%) of the more than 2,500 employees surveyed by YouGov said their pay is not enough to support an acceptable standard of living without having to go into debt to pay for food or bills, and one in ten (10%) do not think their job protects them from falling into poverty.

More than a quarter (27%) said their pay is not enough to cope with a £300 emergency without having to use savings, and only 47% said their pay is enough to help save for retirement.

As many as one in four (28%) of all those surveyed have money problems which affect their job performance, and this rises to 34% of those earning less than £20,000. For example, 19% have lost sleep due to worrying about money.

A financial wellbeing policy sets out an organisation’s commitment to supporting people to achieve a decent standard of living. According to the CIPD, it should encompass three key elements:

1. Pay a fair and liveable wage: pay a wage that enables people to lead a dignified life and meet the real cost of living. Protect people on low incomes from working arrangements that don’t suit their needs; and be transparent about how pay is set and how people can secure a pay rise.
2. Provide financial wellbeing support: create a safe place to talk about money worries; signpost relevant advice and guidance; and offer targeted and easy-to-access employee benefits that help incomes go further.
3. Support in-work progression: help people to maximise their earning potential by developing skills that enable them to take on higher-paid roles and remove any barriers that prevent them from progressing or working more hours.

When such a policy is in place, employees are far more likely to say their employer does enough to support their financial wellbeing (60% versus 28%) and are more likely to say they are keeping up with all bill and credit card commitments without any difficulties (70% versus 58%).

Employees working for an organisation with a financial wellbeing policy are also far more likely to say they have a good level of benefits (70%) than those with employers who don’t (28%). This could include such benefits as occupational sick pay, training and career development opportunities, flexible working, and gym membership.

They are also much more likely to say their employer offers them a generous pension (64% versus 26%) and that their pay is enough to help them save for retirement (61% versus 41%).

“This isn’t just a question of paying people more, it’s also about policies and support that allow people to plan, to know what their income will be in advance, and to know how they would meet an unexpected cost,” explained Louise Woodruff, policy and partnership manager at the Joseph Rowntree Foundation.

“Where employers can help their staff through the current pressures on their cost of living, they are likely to reap the benefits in terms of loyalty, retention, and a healthier, more content workforce, as well as helping to eliminate the huge injustice of in-work poverty.”