The concept of financial wellbeing or financial wellness in the workplace has established itself as a priority on the management agenda.
However, in the past, it has been difficult to truly know the specific cost to a business and how to quantify the impact of any actions that were implemented. To address these two issues, Salary Finance conducted research with over 10,000 UK employees, to better understand how their financial situation impacts their day-to-day and working lives.
The findings were dramatic – 40 per cent of employees, over 4,000 people in our survey, have financial worries. What was most shocking was the extent this stress affects their mental health and performance in the workplace. Those with financial worries are 8.8 times more likely to have sleepless nights, 7.6 times more likely not to finish their daily tasks, 5.7 times more likely to have troubled relationships with colleagues, and 2.2 times more likely to be looking for a new job.
In total we estimate that this represents 13-17 per cent of an employer’s total salary cost – meaning the cost to UK employers as a whole is £39-51 billion per annum. This is 1.9 to 2.4 per cent of GDP annually and half of the total government spend on education at all levels.
Salary as a route to financial wellbeing
A commonly held belief is that financial wellbeing is simply a function of how much money you earn – if you pay employees well then financial wellbeing is improved. This turns out not to be the case. We found that the two groups with the highest rate of financial worries are, perhaps unsurprisingly, those earning £10,000 - £14,999 pa and those who earn more than £100,000 pa.
The percentage stating that they had financial worries in both of these groups is 49 per cent vs the national average of 40 per cent. More alarmingly, a higher proportion of those earning more than £100,000 pa stated that they suffered from panic attacks and depression than any other income group. The lesson? It’s not the amount you earn that dictates financial wellbeing, but what you do with it.
The factors that influence financial wellbeing
We found that financial wellbeing is a consequence of employees’ attitudes towards money and borrowing, saving and spending habits. To understand this in more depth, we developed a Financial Fitness Score from one to five, based on the responses to 10 behavioural questions. This score was a stronger indicator of current financial health than any other factor.
We found that 82 per cent of those scoring ‘one’ worry about their finances, whilst only eight per cent of those scoring ‘five’ worry about finances. We saw a similar pattern across other behaviours. People with higher scores were less likely to run out of money between paydays, saved more, and were less likely to find finances a “scary topic”. The higher the Financial Fitness Score the greater the financial wellbeing. Again, salary levels had a minimal impact on an individual’s score.
How employers can use the Financial Fitness Score
The Financial Fitness Score can help both individuals and employers identify steps to help improve financial fitness and thereby increase overall wellbeing. By understanding employee financial fitness, employers tailor their benefits programme to meet the specific needs of their employee base. Those who score one would benefit from budgeting tools, income smoothing and help managing debt. In contrast, those with high scores want help figuring out whether ISAs or pension top-ups are better for them.
A business can establish its own Financial Fitness Score by taking an average of its employees’ scores. This can be set as a KPI for the business to set a benchmark to improve from, and determine what interventions are needed to improve its employee financial wellbeing.
It can then be used to measure the effectiveness of any programmes that an employer chooses to implement. More critically, it helps an employer determine which financial wellbeing benefits will have the greatest impact on improving the financial and mental wellbeing of their workforce, enabling them to quantify the benefits and ROI. By reducing the number of employees suffering finance-related stress businesses can increase productivity, build retention and establish themselves as an employer of choice.
- This is a guest blog and may not represent the views of Virgin.com. Please see virgin.com/terms for more details.
Virgin Management recently hosted Better Chances 2018 – an event which brought Virgin companies together to discuss what businesses can do to support the mental wellbeing of their employees, customers and communities. Guests included Mind, CALM, Headspace, Salary Finance and many more. Learn more about the Better Chances event and work that's being done to address mental health in the workplace here.