As inflation grows at its fastest rate in decades, the cost of living crisis is really starting to take hold. Even with the energy price guarantee, it is estimated more than 1 million people will be pushed into poverty this winter, pushing UK deprivation levels to their highest in two decades. What can employers do to help?
It’s no surprise that households are falling behind on their bills – 20% of adults, or 11 million people, have missed at least one payment as they struggle to make ends meet.
Aside from the financial consequences of missing bill payments, the impact on mental wellbeing is also huge. In our most recent research, State of Financial Wellbeing: Cost of Living Crisis Report, we found 70% of employees are now worrying more about money than they were three months ago, with 76% suffering with worse mental health as a result. Those forced to take action to make ends meet, whether by reducing spending, using savings or increasing the use of credit cards or overdrafts, generally reported a worse quality of life.
Employers more aware of financial wellbeing – but there’s a disconnect
If there’s one positive which came from the Covid-19 pandemic, it’s that employers became acutely aware of the intrinsic link between people’s personal lives and their performance, demeanor and satisfaction at work.
Consequently, the cost of living crisis has seen firms of all sizes jumping to offer varying support to their employees, whether that’s through one off payments, wage increases, or access to external support.
While this is a step in the right direction, our report found a concerning disconnect between what employers say they’re doing and what employees say they’re receiving. Over three-quarters (80%) of firms say they have introduced new support, but just 19% of employees are aware of these initiatives, and over half want their employer to provide more support.
Clearly, there is a reaction and impact gap at play. So how can employers build bridges and support their people during this time?
Communicate your initiatives – and never stop communicating
Firstly, companies need to be relentless in communicating the support they are offering. Choosing the correct channel for this is key. While email is easy because it’s scalable, scale is also its main disadvantage, as it is easy to ignore. Additionally, there are significant cohorts that may have no or intermittent access to email, particularly those who do not work in offices. Those who work part-time may receive emails at different times and therefore won’t be able to join spontaneous group conversations which often turn emails into action.
Before communicating your financial wellbeing initiatives, look at all the channels you have for internal communications and map them against your employee base, trying each channel multiple times with various messaging. Another tip is to hook to current events and popular culture – talking to people whilst they have money on their mind will always help to direct attention.
Money stigma – a blocker for both employers and employees
What’s also important is for employers to take action against money stigma in the workplace. Although it’s not gone, the mental health stigma is weaker than it used to be and lessons can be learnt from this when thinking about tackling money stigma. There’s no silver bullet, but sharing accessible and human stories, increasing support and raising awareness will go a long way.
Important here is the choice of language. Using polarising language like ‘bad with money’ reinforces the idea that people have a non-changeable relationship with money and are defined by their current situation. We’ve made progress in mental health as it’s more understood that referring to things as ‘nuts’ or ‘insane’ reinforces stereotypes and makes it less likely for people to tell their own story – we must now do the same with money.
Savings – an essential pillar of long-term financial wellbeing
Finally, encouraging saving. This might sound obvious, but mounting evidence continues to show that savings are not only fundamental to financial wellbeing, but that being forced to use savings to make ends meet is correlated with worsening life quality. With this in mind, employers should empower their staff to become better savers – and it’s important that employers get this right.
While most people have a general understanding of why it’s important to save, they may not understand the fundamental and timeless link between savings and long-term financial wellbeing. So generally speaking, you don’t need to convince people of why it’s important to save. You need to encourage them to find the reason why they should save.
This means helping people to find their specific motivation. Sharing stories of how saving has helped people achieve their aims can be powerful here, as there are a finite number of motivations and it’s about finding that one matched to the individual.
Ability to save is as important as motivation
The other important thing is ability. Even with crystallised specific motivation to save, it can still be difficult to do so. This can be driven by various things – a lack of products that allow micro-savings, for example, often stops people from getting started, particularly those that have variable income every month and need to quickly reduce their savings rate if their income drops or expenses soar. It’s important to feel confident in knowing the amount you can save per month and, therefore, the ability to save is linked to the ability to budget.
Incentivising employees to save can also be powerful. While we would advise against turning savings into a competition, some example incentives might be:
- A monthly draw where a small number of savers get that month’s savings double.
- Those who are still saving after a year get their savings topped up by 51
- A free lunch for everyone who signs up to a savings pledge
Overall, while there is a clear role for the Government in providing short-term support packages and improving workers’ rights in the long-term, employers also have a vital role to support the financial wellbeing of their staff during the worst cost of living crisis in living memory.
With low unemployment and the highest level of vacancies on record, supporting the financial wellbeing of employees is not only the right thing to do, it also makes business sense.