Financial wellbeing support can make a real difference to employees as they navigate the cost-of-living crunch. Based on our experience of working with clients, here’s how you can put an effective programme in place.

The year ahead will be a financially tough one for your employees. Inflation may be forecast to fall to 5% by December but the impact on household finances will endure. Most will not see an improvement in their financial situation until 2025 and coping with higher costs will leave the average household less financially resilient.

This has two major implications for employers. Employee financial wellbeing will remain a top priority for at least the next couple of years and employers will have to find a way of supporting their employees in a meaningful and sustainable.

In our experience this means employers need to focus their interventions on four areas.

1) Ensure support that covers all the demographics in the workplace

Financial distress impacts all levels of the workforce.  While lower paid workers have the highest levels of financial worries, top earners also score high.  Added to which a host of variables - age, stage of life and existing financial commitment influence how an individual is impacted by the cost-of-living crisis.   

The financial wellbeing programme will need to focus on three areas to cover all situations.

Build financial resilience – CIPD research shows the most effective financial education programmes focus on soft skills – the attitudes, knowledge and behaviour that help people to feel in control of their finances.  It also shows that sustained support for building financial resilience is better than a one-off intervention.  A programme of financial education helps staff to feel in control of their finances and avoid financial distress.

The most important focus is to ensure that employees have the resources to help themselves.

Recover from financial distress – 51% of UK workers, double last year’s number, say money worries are damaging their mental health.  Clearing debt and coping with the emotional strain often requires help from a range of experts including debt management and counsellors.  An Employee Assistance Programme (EAP) is a cost-effective way to signpost staff to a range of confidential advice and support services that most organisations simply don’t have the resource to provide in-house. 

Increase employee’s overall financial position

Employers can use new employee benefits to improve employee finances.  There is a lot of innovation in this space which can provide flexibility and targeted support for employees. So, it is for the employer to keep on top of this and promote what they have and for the employee to make it their business to find out what is on offer

2) Normalise talking about financial health

Of the 20% of UK adults classified as living in poverty, 68% work.  In-work poverty is at its highest level since records began in 1996 when this figure was below 50%.

Charlotte Hill, CEO of Edenred’s UK charity partner, The Felix Project, says it is critical for employers to destigmatise talking openly about financial distress at work. To make that happen, most organisations will need to create a financial wellbeing policy. A policy signals to employees that their employer takes their financial wellbeing seriously, outlines available support.  It helps employees feel more comfortable asking for help and to manage expectations around what an employer can offer. 

Work with leaders and managers to have regular conversations with their teams to normalise talking about financial health and destigmatise financial distress

3) Offer non-traditional benefits

Employees that work from home, compressed hours or flexibly report better wellbeing and engagement as well saving money on the commute and childcare costs. Similarly, giving staff permission to deal with personal financial matters during the working day supports, helps catch problems early before they escalate and impact mental health.

Despite their prevalence, many organisations aren’t making the most of salary sacrifice.  This helps employees make savings on some of their biggest costs and saves the employer National Insurance contributions.

4) Drive return on investment

In a recent CIPD survey only 26% of staff earning less than £20,000 said benefits were quick and easy to get hold of compared with 65% earning more than £60,000.  Offering employee benefits that meet employee needs, are inclusive and accessible is one of the best ways to increase your people’s spending power. This is especially true for lower paid workers. Employers need to work harder to help lower paid workers understand how particular benefits would support them and make them easier to access. 

In the same study, only 42% of lower earners said their employer communicates which benefits are on offer compared with 74% of high earners.  Communication is key to effectiveness and impact therefore this demands a sustained plan with special consideration give to reaching lower earners.

For more information about how you can support your employees through tough times, please visit our cost-of-living hub.