Financial Resilience

 

Financial Resilience


Employees in debt

Personal debts have risen to the highest level since before the credit crunch, reaching more than £200bn, with credit cards accounting for more than £70bn of the total.1

32 million adults (60% of the population) have a credit card, and full-time employees are much more likely to hold both debit and credit cards than other groups.2 It has become increasingly common to buy things on credit, and people don’t always have a debt management plan in place.

Some feel the pressure to fund big-ticket occasions such as a child’s wedding or a family holiday on credit. However, people also borrow from necessity, such as to mend a washing machine or a broken-down boiler.

It’s not surprising that people have to borrow to fund such events - although we currently have high employment in the UK, not all employees are able to manage on their pay alone. Research from the Money Advice Service shows that 12.9 million3 UK adults have no accessible savings to fall back on, yet each year three quarters of households in the UK get an unexpected bill. To put this into context:

  • 22% of adults (11.5m) have less than £100 in savings and investments
  • 24% of adults (12.4m) would have to borrow or could not pay when faced with an unexpected £300 bill

 

The effect on work

Money worries can be severely debilitating, they can affect every area of a person’s life, including sleep, concentration and motivation.4 The worry can be so overwhelming that, according to Debt Support Trust, almost 50% of people in debt consider suicide.5

Over two thirds* (67%) of employees who struggle financially report at least one sign of poor mental health that could affect their ability to function at work. Some may also feel unable to go to work at all because the effects are so severe, so absence may be higher for those with financial worries.

It can be very difficult for employers to know which employees may have financial problems and require debt help. Many feel too ashamed to admit the extent of their difficulties, and this can further exacerbate the toll on their mental health.

Culture, training, consideration

The important thing is to build financial resilience. And there are a number of areas that can help us do that.6

  • Having control over day-to-day finances. This means not overspending income, and that debt and expenses are manageable.
  • Being prepared for the unexpected, so having the capacity to absorb a financial shock such as an unexpected bill.
  • Having freedom to make choices in life. This includes having access to resources, financial guidance and advice to make better financial decisions.
  • Getting on track for the future, so saving for future plans.


The good news is there are a number of ways that employers can help.

One way is to build a culture where finances, debt and mental health are openly discussed. This helps to remove the stigma and shame, and people are then able to get the help they need. Encouraging a culture where employees feel comfortable talking about any struggles is integral to helping people deal with them. Managers can also help by attending training that equips them to deal with employees who have issues with debt management, spot the signs of mental ill-health and provide the necessary support.

Building financial resilience

There are also a number of budgeting tools on the market that can help with the management of everyday finances, and this can be a great way to help employees to take control of their financial situation.

Many small to medium-sized businesses (SMEs) find that providing access to financial education can be a great help. The world of finance can be complicated and daunting - for those in the black as well as those in the red - with industry jargon that can be confusing. Financial advisors can help make sense of the complex in plain English, they can help people take charge of their finances and this can be a huge weight lifted.

There are reputable companies that will work with employers to provide financial education and help staff save and manage debt via payroll. Loans can be made available with interest rates that are reasonable, and this can help employees get back on their feet. And saving in a manageable way via payroll can help employees build a financial safety net for the future.

How employers will benefit

Providing access to financial experts can also be a great way to make your staff aware of what they’re covered for. For instance, specialists can explain the value of the pension that SMEs are now legally obliged to have in place, which helps employees appreciate the contributions that employers make, thus increasing employee engagement. Having the tax advantages explained can help employees work out if they can afford to make any increases, and this can help them build financial resilience for their future.

There are other financial benefits that can be offered by employers that can provide financial support too. Group protection products have long been used by SMEs to provide help at a time when employees need it most. Life assurance, income protection and critical illness cover can all provide financial lifelines for those unable to work because of ill-health or disability, or to provide a financial payout to dependants in the event of the death of an employee.

As we’ve seen, the emotional toll of struggling financially can be overbearing, and it can be a great help for an employee to talk to someone that understands what they’re going through. Employee assistance programmes (EAPs) can provide 24/7, 365 access to trained counsellors that will provide confidential support. Group protection products can have EAPs included as standard, so it’s worth looking at what’s included before deciding on what to provide to your staff.

Helping employees with their financial situation is a huge win-win for SMEs as well as supporting those with financial difficulties wider physical and mental health too. It supports engagement, loyalty and can lead to a more productive workforce. Financial worries are often hidden, by bringing the topic into the open and offering access to financial support, you can help build financial resilience for both your staff and your company.

Get in touch with an Elect consultant on 0800 0232 785 or contact us here to learn more.

Sources:

 https://www.theguardian.com/money/2018/jan/08/uk-consumers-trapped-in-credit-card-debt-for-longer-than-thought
 http://uk.creditcards.com/credit-card-news/uk-britain-credit-debit-card-statistics-international.php
 https://www.moneyadviceservice.org.uk/en
 https://www.moneyandmentalhealth.org/money-worries-at-work
 http://www.debtsupporttrust.org.uk/debt-advice/debt-and-suicide
 https://www.uk.mercer.com/what-we-do/wealth-and-investments/financial-wellness.html

 

Disclaimer:

This article has been written in collaboration with Legal and General, one of Elect’s insurance providers. It is for information only and is not specific advice. It is based on our current understanding of the attributed research which may change in the future.