Undeniably, the difficult economic conditions of the past few years have wreaked havoc on employees’ finances – both in the short and the long term.
Sky-high inflation and extortionate energy prices have resulted in an ongoing cost-of-living crisis. As people struggle to afford basic necessities, many employees have been forced to live paycheck to paycheck, often at the expense of larger, more distant financial goals.
However, strong long-term financial wellbeing and planning is vital to securing an employee’s future, regardless of the present-day economic landscape. As such, it is essential that employers, HR managers, and decision-makers take steps to encourage and empower employees to continue to consider their future financial wellbeing, even as they navigate the cost-of-living crisis.
So, how, and indeed why, should employers help them take charge of their financial future?
The importance of long-term planning
Having a strong long-term financial plan is key to financial stability and security. As employees progress through their careers and lives, they will encounter several costly milestones that require careful financial planning extending beyond the day-to-day management of short-term financial obligations.
Such milestones might include buying a property, having children, building wealth, or affording a good standard of living during retirement. Robust long-term financial planning is also essential when things don’t go to plan, and employees should be in a position to tackle financial emergencies without being forced to rely on debt or becoming financially devastated. A lack of a solid long-term financial strategy means, therefore, that an employee’s entire future financial wellbeing is at risk.
Employee pension schemes are another important aspect of an individual’s long-term financial wellbeing that may be being overlooked in the current climate. Indeed, in order for employees to extract the maximum value from their pensions, it is important to give them as long as possible to grow. As such, by maintaining their focus on their long-term financial security as early as possible, employees can give themselves the best chance of dramatically increasing the value of their pensions and securing their financial wellbeing for the future.
That said, despite the evident importance of long-term financial planning, most employers are offering limited, inadequate support to help employees take action, particularly given the current fiscal environment. Worryingly, just two-in-five (38%) workers have support available through their employer to manage their long-term finances, according to Mintago’s research.
A failure to support employees’ long-term financial wellbeing is bad for business
Many employers may feel that employee finances are not their responsibility – yet this is not a problem that affects only the individual. The impact this will have on businesses cannot be underestimated, as employees’ poor financial wellbeing can significantly impact productivity and job satisfaction.
For instance, Mintago’s latest research revealed that the rising cost of living and money worries were the two largest causes of stress among workers, while half (49%) of employees shared that stress and anxiety negatively impacted their job performance.
Moreover, poor long-term financial wellbeing is not good news for staff retention. A lack of support is ultimately interpreted as a lack of concern for employee welfare and risks alienating a workforce, with less than a third (32%) of workers feeling their employer cares about their financial wellbeing at present. Demonstrating this, almost half (44%) of employees would leave their current role for one with better financial wellbeing support that would enable them to reach their financial aspirations for the future.
Clearly, employees want and need greater support from employers where their financial wellbeing is concerned. And they are willing to move jobs to get that. The Society for Human Resource Management (SHRM) estimates the cost to replace an employee is between six and nine months of their salary. Based on the UK’s average salary of around £30,000, we can estimate that the average staff turnover costs between £15,000 and £22,500 per employee. And for those businesses whose employees are typically on higher salaries, the cost naturally increases significantly, making a clear business case for investing in financial wellbeing as a staff satisfaction and retention strategy.
Helping employees plan their financial future
But what can be done to support employees with their long-term financial journey?
One of the best ways to help employees plan for their financial future is by supplying financial education and training. Many employees lack the necessary financial literacy to make informed decisions about their finances, particularly when it comes to the complexities of long-term financial planning.
Providing access to educational resources can teach employees essential financial skills, such as budgeting, saving, investing, retirement planning, and debt management, helping them make better-informed decisions to manage their long-term finances effectively.
Another way to help employees plan for their financial future is to provide access to independent financial advisors (IFAs) who can help employees develop a strategy that grows their savings despite the challenges encountered in the current economic landscape.
If an employee has a specific long-term financial goal in mind, for example saving to buy a property or planning their dream retirement, speaking with an IFAs can also provide them with tailored, unbiased and impactful advice to achieve this.
Similarly, implementing a comprehensive pension dashboard would enable workers to effectively plan for their long-term retirement goals, optimising and simplifying management of their pension. As well as this, such platforms even help employees to trace lost pension pots from previous employers, giving their finances a healthy boost.
Employers must act to boost long-term financial wellbeing
Helping employees plan for their financial future is crucial, particularly within the context of today’s economic climate. Employers can and must play a vital role in supporting their staff by providing financial wellbeing support, empowering employees achieve long-term financial security and stability while also promoting an attractive, productive workplace culture.