Why Is Financial Wellbeing So Important?
September 6 2018Read more
Money isn’t everything, but financial wellbeing can improve quality of life and overall happiness significantly.
Not only does it begin to eliminate the financial worries that can be a contributing factor to poor mental health, but it also reduces the uncertainty around future expenses and resources, thus providing a sense of economic achievement.
By supporting financial wellbeing for employees, you’re providing them with the ability to obtain, protect, and utilise financial resources more effectively while also avoiding economic dependence, debt, and bankruptcy.
In this piece, we’ll explain what we mean by financial wellbeing. We’ll also explore the options available to support employees with salary finance in order to secure their financial wellbeing.
It relates to the sense of security an individual feels when it comes to meeting money needs. It’s all about having the monetary freedom to make choices that lead to a better and more enjoyable life.
Financial wellbeing is rapidly becoming a more widely known concept for employees and employers. It’s increasingly accepted that employers can, and should, do more to promote sustainable financial planning practises and increase the financial security of their employees.
According to a report by the House of Lords Select Committee on Financial Exclusion, employers have a key role to play in financial wellbeing at work.
It cites research suggesting 70% of UK employees admitted to wasting a fifth of their time at work worrying about their finances and at least 17.5 million working hours are lost each year due to workers taking time off due to financial stress.
There’s also a connection between financial wellbeing and mental health. Managing finances can be difficult at the best of times. Whether it’s paying the bills or trying to avoid future debt, we all have to consider the immediate problem of where our money comes from as well as the longer-term implications of a poor credit rating.
It's not uncommon to see financial factors affecting health and wellbeing. In some instances, it can affect:
The mental health effects of poor financial wellbeing for employees are well known, however, research has found organisations can also suffer when their team members are concerned about their finances.
In 2018, Aegon reported that 11% of workers surveyed admitted they have experienced a drop in productivity as a result of their personal financial situation.
This can result in deterioration in the quality of work your team produces, a decrease in new ideas being created at work and routine tasks taking longer to be completed.
With the rising cost of living in the UK, more and more workers are finding it hard to remain debt-free. If you suspect members of the workplace are struggling financially, there’re various employer financial wellness programs you can offer.
Financial planning provides the ability to obtain, protect, and utilise financial resources more effectively while also avoiding economic dependence, debt, and bankruptcy.
While individual financial plans differ and are dependent on current circumstance, financial needs, and their economic ambitions, the general guidelines of the steps that can be taken towards financial independence should apply to everyone.
Other options to consider for promoting financial wellbeing in the workplace include:
Assessment: The first step in any successful financial planning exercise is to assess the current financial situation and develop an understanding of income and overheads such as utilities, rent, phone bill, food shopping, etc. Record all income, living expenses, debt payments, recreational spending, and savings contributions for the previous month. This step provides the foundation for the financial plan as well as giving them a holistic view of their current cash flow.
Education: As you have a duty of care to your employees, you should take it upon yourself to educate them on how to manage their finances. However, you don’t have to do this yourself. You can employ the help of financial coaches to advise staff on how they can best manage their outgoings. These lessons on financial management can help workers get out of debt in the long-term.
Stet up goals: Once they have an understanding of their current finances, the next step is to develop financial goals. These help to determine where to spend and save money, presenting them guidelines for improving their financial wellbeing. Remember to create SMART goals, they should be specific, measurable, achievable, relevant, and time-bound.
Offer an advance: In some situations, you’ll have staff members who have mounted up debt over the years. Some employers offer loans to employees, you could give them the option to talk to you if they ever need an advance. This would be beneficial for staff wellbeing too, as it could help relieve stress when they’re under pressure in their personal life.
Employee loans: During times of uncertainty, it’s not uncommon for employers to offer loans to employees. There are different types of loans with various interest rates and repayment options. If you do offer this option, you may have certain reporting obligations depending on the type of loan. There are different rules for beneficial loans (interest-free) and loans that you write off.
Commuting costs: According to research from Lloyd’s Bank, employees in the UK spend more than 251 hours commuting to and from work every year with an average cost of £755 annually. You can assist your staff by identifying areas around the workplace with either free or cheap parking. You could also introduce a cycling scheme at work, or encourage walking for those within a reasonable distance.
Employee Assistance Programmes (EAP): An EAP offers debt-free counselling to employees. It doesn’t just focus on financial troubles, instead, it offers staff a wide range or unconditional support with issues relating to work or their personal lives. With a fully confidential EAP service, employees feel more comfortable talking about their financial difficulties or mental health.
After following their financial plan for several months, encourage staff to reassess, evaluate, and revise it.
This is an important step to make sure they don’t get complacent. Without reassessment, their financial plan can become outdated and irrelevant which will lead to dissatisfaction with progress.
By considering these tips, you’ll show you value staff, which will help to strengthen bonds as you’re showing how much you care about their personal issues.
For assistance on how to implement these techniques and schemes mentioned, get in touch with Health Assured today for more information. Call us on 0844 892 2493.
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