Since the COVID-19 pandemic began, financial wellbeing has come into sharp focus for employers and employees. Job losses, financial instability, and general anxiety has made the last two years very tough for many. In this article, we’ll share insights on the impact of the pandemic on the financial wellbeing of UK employees.
According to Close Brothers’ Financial Wellbeing Index 2019, 94% of employees are anxious about money, with 39% worrying about their finances nearly all the time. Importantly, the employees interviewed in the study admitted that their financial concerns were affecting them at work.
Financial wellbeing isn’t about someone’s financial position. It’s about how optimistic and secure they feel about their current and future finances. Understanding how to manage money to enjoy life today and to meet future goals is the key.
Financial wellbeing has a big impact at work. When employees feel in control of their money and not under financial stress, they tend to be more ‘present’ at work. They are less distracted and therefore more motivated and engaged. Employees who are not under stress are more productive and take fewer sick days.
This is all good news for your business.
The COVID-19 crisis affected most peoples’ finances whether for better or worse. Let’s take a look at some of the key impacts of the pandemic on employee financial wellbeing:
According to The Guardian, UK households increased their savings to the second-highest level on record between January and March 2021. This was probably due to a combination of people feeling financially insecure and the closing of non-essential shops which limited spending opportunities.
AA Financial Services published a study that found 85% of UK adults spent less during lockdown, saving an average of £617 each month. It was also reported that since the start of the pandemic, 31% of people with savings accounts increased their monthly deposits.
But for others, the pandemic wasn’t so rosy. The FCA Financial Lives 2020 survey found that 38% of adults were in a worse financial situation due to COVID-19.
Aviva’s recent study, Thriving in the Age of Ambiguity, revealed that 57% of employees felt they were “just getting by financially”. Worryingly, 24% felt that they made bad debt decisions during the crisis, meaning the pandemic had a negative impact on their financial wellbeing.
This abrupt change in financial circumstances plunged many people into difficulties. According to a recent Citizens Advice study, 2.5 million people are behind on their broadband bills.
The study also found that 700,000 people fell into the red during the pandemic. It highlighted that 18 to 34-year-olds and those with children under 18 were three times more likely to fall behind. Citizens Advice also reported that by the end of 2020, 2.1 million households were behind with energy bill payments.
Aviva’s Thriving in the Age of Ambiguity study shows how sudden events can drastically change people’s financial wellbeing almost instantly. In the foreword, Rob Barker, MD, UK Savings & Retirement at Aviva writes:
“At its core, ambiguity leaves us open to potential losses – to confusion, uncertainty, and doubt – through the risks of the unknown. But it can also open us up to potential gains – to opportunity, growth, and progress – and the ability to thrive in adversity.”
Aviva’s research illustrates that a person’s sense of financial wellbeing is affected by their personality type. Those who are more emotionally resilient, conscientious, and optimistic are more likely to be able to adapt and to turn challenging situations to their advantage.
Whereas individuals who have “less emotional resilience” are more inclined to experience “negative emotions, low financial and mental wellbeing, along with feelings of anxiety.”
Due to the uncertainty of the last two years, many employees have altered their mindset and learned to adapt. Some turned to solutions such as borrowing money or requesting mortgage holidays. Others capitalised on new opportunities.
People improved their digital skills, realising the capability of new technology. Crafters and artisans seized unique opportunities to build a following on social media selling their products to a wide audience through cost-effective platforms like Etsy.
For many people, the pandemic has been an opportunity to reflect on what means the most to them both at home and at work.
Some people used COVID-19 lockdowns to further their education, learn new skills, and accomplish lifelong goals. Others began to place higher value on spending time with family and friends. According to Aviva, nearly half of all employees have become less focussed on their careers as a consequence of the COVID pandemic.
In Aviva’s report, 69% of employees reported that flexible working will now be an important consideration in their future job or career choices. Interestingly, 64% of employees felt that having complete flexibility with their working hours would increase their productivity.
As a result of the pandemic, a greater proportion of employees now understand the value of financial resilience and are working to improve their situation. This includes saving more, making better use of employee benefits, putting more into their pension, and keeping a closer eye on their money.
Despite this, The UK’s Financial Wellbeing Index reveals that UK employees are susceptible to financial stress and shocks. Plus they’re also “ill-prepared for their financial future” which is a “huge concern”.
Since the pandemic, companies are seeing the value of promoting their employees’ financial wellbeing. Nearly half of all employers (41%) already have a financial wellbeing programme in place. In addition, 27% plan to implement a programme in the next three years.
As part of this, some companies are offering tailored, confidential support to help employees to manage and plan their finances. How does this look in practice?
There are plenty more ways employers can tackle financial wellbeing at work. A company that understands how important financial wellbeing is to their employees will often take a holistic approach to issues. That means they will put resources in place to offer bespoke practical support to help minimise the impact of stress on productivity.
It’s useful to know that 38% of UK employees want more financial wellbeing help from their employer. A lot of employees will have different circumstances and priorities now than they did pre-pandemic.
So when planning a financial wellbeing package, it’s worth finding out what kind of financial wellbeing support your employees want right now. This may include information and advice on:
If you’re not sure what to offer, it’s best to ask your employees.
Caring for your employees’ financial wellbeing increases productivity which benefits your business’ bottom line. In addition, when employees feel genuinely cared for and valued by their employer, they’re more likely to stay longer in their role. This means that less money and time is spent on acquiring and training new talent.
A financial wellbeing programme should be inclusive of all employees whatever their:
Consideration also needs to be given to how people will be able to easily access support when they need it. This might include for example:
When it comes to boosting financial resilience and reducing financial stress, allowing employees to access their pay ahead of payday can be a real game-changer.
On-demand pay allows employees to access a portion of their earnings on their schedule, instead of having to wait for their normal payday. It’s great for covering unexpected costs, like a broken boiler or car repair.
Simply knowing they have access to their pay if they need it can have a positive impact on reducing financial stress among your employees.
If you would like to find out more about how on-demand pay can help promote financial wellbeing among your employees with zero cost to your business, please get in touch to request a demo.
The information in this article is for general information only. It does not constitute professional advice from Openwage. Openwage is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the information in this document relates to your unique circumstances.