Empowering employees to achieve long-term financial security is vital
The fiscal conditions of the last few years have caused unprecedented disruption to the financial security of Britain’s workers, bearing long-term consequences for the finances of many UK employees.
Indeed, spiralling inflation, mounting energy costs and constant interest rate hikes have created an economic climate in which Britons are struggling to cover their everyday expenses, with future financial planning falling by the wayside for many individuals – at great risk to their long-term security.
Employers, HR managers and business decision-makers must intervene. It is vital that they take action to bolster employees’ long-term financial planning and empower them to stay on the right track, despite the short-term financial pressures they are facing at present.
As such, employers should consider how they can help workers get their long-term financial wellbeing in check – there are several reasons for why it should be a top priority for businesses.
The vital importance of long-term planning
Whether it be aspiring to homeownership, a luxurious retirement, building wealth or starting a family, it is almost certain that employees will have financial goals that require significant, careful planning and financial stability. Achieving such aspirations is no easy task, particularly without the support required to effectively manage and plan beyond their everyday financial commitments.
Taking as an example a comfortable lifestyle in retirement: employee pension schemes are indispensable for successful retirement planning and future financial wellbeing, yet these are currently being criminally underutilised. In fact, new research shows that a fifth of employees in the UK have stopped or reduced their pension contributions in the last year to boost their take-home pay.
Unfortunately, while this approach is understandable in the current climate, it fails to take into account the time it takes for compound interest to accrue on one’s pension. As such, by not contributing during difficult periods, employees will not be able to maximise the value of their pension, which could impact their ability to safeguard their finances in the long run.
What is more, employees’ lives don’t always run smoothly, meaning that they will inevitably encounter financial emergencies or unforeseen challenges – the cost-of-living crisis being a striking example. In such situations, having a solid understanding of long-term finances is crucial to prevent falling into debt or encountering additional financial challenges, and employers should be playing a crucial role in enabling this. Therefore, companies that do not prioritise supporting long-term financial planning are effectively jeopardising the financial future of their workforce.
Why employers should take an interest
Regrettably, businesses that are providing the right kind of support for long-term financial health appear to be few and far between. Indeed, according to Mintago’s recent research, just 38% of workers have access to employer-provided support for managing their long-term finances.
This is likely because many employers view their workers’ finances as an issue for which an individual is solely responsible. However, it is crucial to not underestimate the impact that poor financial wellbeing among employees can have on a business, namely in terms of productivity and staff satisfaction.
Mintago’s latest research revealed that half of employees (49%) feel stress and anxiety caused by their finances is having a detrimental impact on their overall job performance.
The research also found that rising cost-of-living and money worries were the two leading causes of stress among employees. This means that businesses could see their workers’ job performance take a hit if action is not taken to bolster support in the current economic climate.
Moreover, the ramifications of poor long-term financial wellbeing extend to staff retention; a lack of support could easily be written off as a lack of interest in employee welfare.
Concerningly, just a third (32%) of workers feel that their employer genuinely cares about their financial wellbeing – perhaps explaining why almost half (44%) were willing to leave their current role for an employer providing improved financial wellbeing support. Evidently, workers appreciate employers who are committed to supporting them in achieving their long-term financial goals.
Ultimately, investing in financial wellbeing is an invaluable part of a business strategy to promote staff satisfaction and retention, and can be highly cost-effective. Indeed, The Society for Human Resource Management (SHRM) estimates that the cost of replacing an employee ranges from six to nine months of their salary. Given that the average salary in the UK is around £30,000, the average staff turnover cost is therefore estimated between £15,000 and £22,500 per employee – a loss of which could be devastating to a startup in the current climate.
The action employers can take
There are several strategies employers can use to provide robust, impactful financial wellbeing support and in turn bolster their workforce’s financial future.
One of the most effective is offering comprehensive financial education and training. Many Britons reach adulthood having had zero exposure to the resources required to build strong financial literacy and may therefore struggle to make the best-informed monetary decisions.
Financial literacy is particularly of value with regard to long-term financial planning, where money-management strategies become more complex.
The simple act of supplying educational resources on topics like budgeting, saving, investing, retirement planning, and debt management can help employees develop vital skills and make educated decisions in terms of their financial future.
Another fantastic tool employers can offer is access to independent financial advisors (IFAs).
Taking a tailored, impartial approach, IFAs can help workers develop a bespoke strategic plan to help them meet their unique financial goals. In doing so, employees will feel empowered to make informed financial decisions and navigate their individual financial journeys effectively.
A third option, which specifically supports employees’ retirement plans, is to implement a comprehensive pension platform. Employees can view all their pension investments in one place via a single dashboard, effectively streamlining and simplifying their pension management. Such platforms also enable workers to track down lost pension pots from previous employers with significantly greater ease, potentially giving their pension a sizeable boost.
The importance of helping employees plan for their financial future cannot be underestimated and must be stressed even more acutely within the context of today’s economic climate. By empowering staff to achieve their financial goals as well as long-term security, businesses can expect to reap the benefits of a contented and productive workforce.