Reward and Wealth at Work surveyed over 90 employers to learn more about their approach to financial education in the workplace. Three experts respond to the key findings and consider the starting point for HR teams who are keen to do more to help their employees
1. A quarter of respondents say that they provide financial education for employees as they reach retirement, and 22% provide education for staff struggling with debt problems. But in many cases, there is very financial education at any other point in an employee’s life. How can employers extend the range of financial education that they currently offer?
Jonathan Watts-Lay, director, Wealth at Work (JWL): It is important to consider what people need to understand when they enter the workforce. It is everything from understanding their payslip, through to the benefits on offer.
When someone has been in work for twenty years, it’s a good opportunity to consider whether they should be increasing their pension contribution. There may be other savings vehicles within the workplace, such as save as you earn schemes, to consider.
Ten years out from retirement there’s an opportunity to help people understand their options and whether they are likely to want to go into drawdown or buy an annuity, and therefore put them on the right investment strategy for that glide path.
As well as life stages, there are events. The annual window when employees must decide what benefits they would like to take for the coming year is one such event. Research shows that often benefit take-up in many areas can be really low. In such circumstances, employers should assess whether it is because people do not understand the value of the benefits or whether the benefits are unsuited to the workforce, and act accordingly.
Charles Cotton, performance and reward specialist, Chartered Institute of Personnel and Development (CIPD) (CC): First, organisations should build a business case for providing financial education. They could use research from the CIPD, which came out earlier this year in association with Close Brothers, which shows the impact that money worries can have on employee performance, and the extent of the problem. Employers tend to focus on dealing with the symptoms, such as absenteeism or lower performance, rather than the causes of the financial worries. Proper financial education and guidance sits in the preventative camp. It’s about taking measures to try to mitigate the problems which can arise.
Olenka Kaczmarczyk, pension and benefits consultant, Lubrizol (OK): It’s important to educate employees well before they reach retirement, to help prevent issues with debt, support them throughout their working life and ultimately to help them achieve their retirement goals. Ideally employers should proactively offer support to all employees, not just those experiencing a crisis or retiring.
This could be achieved simply by offering internal presentations offering guidance to employees, and signposting them to appropriate guidance (such as an EAP and including from the government where available). Alternatively or additionally, an external provider could be engaged to present to employees and/or run a series of financial education workshops.
In recent years there has been an increasing number of financial education providers coming to the market. Employers should choose one that they feel comfortable with and most appropriate to their needs. It would be worthwhile, for example, for an employer representative to ask to attend a session as a delegate to help understand the value that the service could offer to their employees.
It is important for an employer to be clear to employees that they are offering guidance or education, and not advice, due to strict regulations surrounding this.
2. 60% of survey respondents do not analyse their workforce to understand their financial education needs, and 81% do not have a formal financial wellbeing strategy. How can companies to get started when it comes to introducing financial wellbeing and analysing the workforce?
CC: It depends on how comfortable employees feel about talking about their money concerns. If they are open to this, you can run some staff workshops or focus groups. You could run a survey of employees, or look at your HR data and issues like pay or pension dependence, et cetera, to see whether staff are more likely to be more receptive to certain things. And, of course, you can hold physical events or virtual meetings. You can also make staff aware of external resources like the Money Advice Service or Pension Wise.
It also depends on the starting point. If you are a large firm with an existing reward package, then creating a financial wellbeing strategy may be relatively straightforward. If you are a small firm, then creating a strategy may be a longer way off and you may be best to focus on a few simple steps that get you there eventually. Taking small steps like highlighting to staff where they can get financial guidance, such as the Money Advice Service or Pension Wise, can be helpful. A firm could also invite an independent financial adviser to come in for 40 minutes to give a basic financial awareness talk focusing on three or four big decisions such as making a will, joining a pension scheme, and buying a home.
OK: It is possible to over-segment the workforce when beginning to look at financial wellbeing. During the lifecycle of an employee, they may go through many different life events which affect their financial health at any given time and they may not fit neatly into a category at any given time. Employees are also working for longer and perhaps more flexibly than previously, which can affect their life decisions.
If an employee doesn’t have a basic level of financial education, it may be difficult for them to understand where they would benefit from assistance. Perhaps a good starting point would be a more general financial education, to help employees understand which areas they would need more support in. For example, saving for a house, pension or debt issues. This education is important to help guide employees to make appropriate financial decisions right from their first day of employment.
JWL: We have conducted focus groups with different cohorts of employees in the past and often the starting point is to talk through the existing benefits that are available, because you would be amazed at how many people do not understand what’s on offer.
We characterise different financial wellbeing initiatives as “push and pull” strategies. There are certain benefits that reward teams may want to push out to people to make sure they really understand them. A good example might be the launch of a Save As You Earn scheme. There, employers should explain what the scheme is, how it works, and what benefits are so they can decide whether to join the scheme. So that’s a push strategy, with the employer pushing that out to the employees.
Pull strategies probably work better on issues like debt management because you can’t really go out and say to your staff “Oh if you’ve got some debt problems let us know,” because it’s a bit too personal. There, it’s better to make digital resourcing available - so it might be simplistic steps that they could take themselves, like debt consolidation of credit cards, through to more serious support, such as debt counselling.
3. 88% of respondents said that they have an employee assistance programme with debt support. What are some of the pros and cons of an EAP as a form of financial wellbeing support?
OK: An EAP provides employees with free and confidential access to telephone or face to face counselling. It also often gives useful online information for reference. It may provide management with useful information on the number of employees experiencing money worries, whilst not breaching confidentiality.
On the flip side, there may be a limited number of counselling sessions available. Counselling could be more appropriate for employees who are experiencing issues, rather than dealing with the issues before they reach a crisis point. Finally, employees may not feel comfortable discussing debt issues with an employer-sponsored programme.
CC: EAPs can be valuable. What employer also should consider as part of a wellbeing strategy is how to help people to avoid getting into these situations in the first place. Try to create an environment where employees feel comfortable about talking about these issues.
JWL: EAP systems should be a safety net, rather than the first thing you arrive at as an employee. Wellbeing strategies should be preventative; they should help employees identify that they have an issue with debt and signpost that there are resources available. The EAP should be there if everything goes badly wrong.
The data show that people with financial stress are less productive. As the EAP is often a last resort, there is a good chance the business has already suffered from a lack of productivity. Therefore, there is a commercial argument in favour of helping people before they reach the point where they need an EAP.
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