Empowering your staff to feel confident in dealing with their finances can not only help them, but improve your business, too
Financial education is in demand with 40% of organisations offering it and a further 40% considering it or planning to offer it in the future. That financial education is one of the fastest growing benefits is understandable: the advent of defined contribution pensions, pension freedoms, the shift in responsibility to individual, increasing longevity, challenging and uncertain economic times and ever-increasing complexity in tax and investments.
For employers there are the pressures to drive increased returns on benefit spend, improve engagement, productivity, presenteeism and profitability and the ongoing challenges of attracting and retaining the best people. It’s no wonder the interest in financial education, as it can deliver on all these issues for both individuals and their employers.
Even against this backdrop, building a case for financial education is usually a combination of factors that support a decision and the main drivers can be thought of under five broad headings:
Catalyst for change
Whether there is a change in your DC pension scheme, you have a profitable maturing share scheme, you are downsizing, you want to encourage an increase in the number of retirees or you are closing a defined benefit pension, financial education provides a simple, easy-to-implement and cost-effective solution.
It can help employees to understand the change, how it affects them, the risks and opportunities available and gives them the confidence to make better-informed decisions. All this and often at a fraction of the cost of consultancy, an extended HR process or risk management. And its effects last forever, creating more financially secure and positive staff.
Sometimes it’s just the right thing to do: not just for the staff affected but also to demonstrate to everyone that’s just the supportive type of organisation you are. It’s not always the cost of something that needs to be considered, but the cost of not doing something and the long-lasting impact on your employee brand.
That said, there are some real and tangible measures that can positively show on your business bottom line. Research shows 8% of staff take time off work due to financial stress. Financial education can reduce money worries, so reducing absence cuts the costs of absenteeism and increases productivity. Financial education shows the value of all your benefits so enhancing your brand and retaining staff, reducing acquisition costs and increasing loyalty and engagement. It can reduce the cost of benefits communications and free up the time your teams would otherwise take in dealing with benefits queries.
How effective are your staff at work? Are they functioning at 100% all of the time? Of course not, but did you know that 55% of employees say money worries affect their ability to do their job, with one in four losing sleep as a result of financial stress2. Financial education reduces money worries and empowers staff. As it increases knowledge, confidence and inspires action, its impact lasts a lifetime. So imagine the impact on your business if half your workforce improved their effectiveness at work every day from now on.
For those of you in industry sectors that have to compete hard to attract and retain the best people, what is the potential risk to your business in you being the only company that does not offer financial education? You may have great benefits, but if staff don’t understand them, don’t know how to use them to improve their own financial wellbeing, they are likely to leave you for an organisation that gives them that support.
Financial education comes in many shapes and sizes. It doesn’t have to be a big project to introduce, and it doesn’t have to cost a lot. Even if you only start with those staff that are most at risk or most in need, a little goes a long way.
There are many things in business where delay is costly. With more businesses recognising the value that financial education can deliver, being one of the 20% of companies that don’t offer it, or one of the 40% that is considering it, could be the worst strategic decision your business makes.
1 Close Brothers pension research September 2016
2 Neyber research March 2016