People who are struggling with their personal finances are less effective at work. The Rewarding Tomorrow’s Workforce survey explored what measures organisations are taking to ease the pressure on their staff. Maggie Williams reports
In an economic environment where pay rises are failing to keep pace with inflation, it’s not surprising that the link between money worries and employees’ health and work performance has come under increasing scrutiny. To open this section of our survey we asked participants about their financial wellbeing priorities for the year ahead, asking them to rate the importance of a list of six criteria.
‘Reducing stress-related absence due to financial worries’ received a high rating, with 60% of respondents making this either their first (31%) or second (also 31%) choice. ‘Employees struggling with day-to-day debt’ was also a significant concern, with 29% rating this as their most important consideration, and 33% putting it in second place.
Age-related issues, such as employees making poor at-retirement decisions and being scammed out of their pension were considered less important, with 52% putting this in either fifth (27%) or sixth (25%) place.
Having an ageing workforce that cannot retire for financial reasons was also low on the list, with 36% putting this in fifth (14%) or sixth (21%) place.
THE TOP FIVE FACTORS
We also asked participants to rank five financial factors that will affect their company over the course of the next year, in order of importance. ‘Meeting future employer increases to autoenrollment statutory minimum contributions’ was the top answer, with 42% ranking this as their most significant factor overall.
‘Communicating forthcoming changes to autoenrollment minimum contributions’ was the second top response (24%). Participants were less concerned about handling defined benefit (DB) transfer requests, with 32% putting this factor in last place.
Meeting the costs of a DB scheme was only judged to be of moderate concern to respondents who answered this question. It was ranked in first place by only 19% of respondents, compared to 33% who ranked this as the third most important factor out of five, and 26% who placed this fourth. However, this is clearly a problem that is not going to go away quickly. We also asked respondents which other factors they thought would still be a problem for them in three years’ time. “The cost of the DB scheme impacting future pensions provision” was one of nine answers we received relating to legacy DB pension problems. Other concerns included “People not saving enough for retirement and blocking positions” and “Future employer increases [to auto-enrolment contributions]”.
CHANGES TO AUTO-ENROLMENT
While participants are clearly concerned with the financial effects of auto-enrolment, most are well prepared for the forthcoming changes. We asked them what action they would be taking to address the 2018 contribution changes (see box, right). A third (33%) already offered more than the new minimum rate, but will be communicating the changes to the workforce.
Twenty-two percent said that they would be taking no action at all, suggesting that their arrangements are already in place for the changes. Some employers are having to take more substantial action, however. Eighteen percent said that they will have to increase contributions for the majority of their workforce, and 14% responded that they would have to change contribution rates for some employees.
Fortunately, only 2% said that they would have to reduce spend on other benefits as a result of the increase.
EDUCATION AND ADVICE
We asked participants in what circumstances they would offer financial education to their workforce. ‘Retirement planning and helping employees understand their retirement income options’ was the most common answer, with 24% saying that they provide education in this context.
Twenty-two percent also said that they would provide education to support employees struggling with day-to-day debt problems. However, 30% offer no financial education support at all. We also asked participants in what circumstances they would offer regulated financial advice to their workforce. The answers show a similar pattern to our financial education question.
Financial advice provision is concentrated around the end of individuals’ careers, with ‘retirement planning and helping employers understand their retirement income options’ the top-ranked answer (39%) Twelve percent would offer advice to employees who are affected by the pensions lifetime allowance or annual allowance limitations.
A third (33%) did not offer any access to regulated financial advice. Organisations have a relatively limited understanding of their workforces’ financial education and advice needs. Sixty-one percent of respondents do not analyse the need for financial education and regulated advice in their workforce. Fourteen percent say that they used anecdotal feedback from managers, and 12% said that they use analytics from their employee assistance programme (EAP).
No-one combines data from multiple sources (such as the employee assistance programme or a pension scheme) to build a picture of their staff members’ financial education and advice needs.
FINANCIAL WELLBEING BENEFITS
Finally, we asked respondents what types of financial wellbeing related benefits they offer to staff. The answers showed that employers are focused on supporting staff who are struggling financially. Eighty-one percent of participants said that they provide an EAP with debt support to their workforce, and 30% provide access to low-cost loans or loan consolidation. Although 21% offer financial education to some degree, only 12% provide financial advice funded by the employer.
Although it’s heartening to see employers offering support to those who are struggling, this typically doesn’t form part of a co-ordinated approach to financial wellbeing, as only 18% of respondents have a formal strategy in place.
It’s clear from our findings that the two biggest issues for employers are meeting future pension costs – whether auto-enrolment or ongoing defined benefit (DB) expenses – and supporting employees who are struggling to make ends meet. But there is little in the way of a formal strategy in place, or the tools for measuring its success.
This article is featured in Reward’s Rewarding Tomorrow’s Workforce research report. CLICK HERE to read the full report.