The balance of savings and borrowing: ways to use financial wellbeing benefits to help employees make the right decisions

Financial wellbeing has been rising up the corporate agenda in recent years. Since financial worries can stop employees performing at their best, how can employers help their people make healthy financial choices and habits?

The COVID-19 crisis is putting extra pressure on employees’ finances. Helping employees to manage their money should form part of a suite of employee wellbeing services, designed to ensure that workforces remain healthy and productive even in challenging circumstances. 

What’s also clear is that financial wellbeing is not just about how much workers earn, but about the level of control they feel they have over their finances, irrespective of pay and grade. Employers are facing increased pressure to help their employees take good financial decisions, make the most of their earnings, and feel more in control of their money.

Responsibilities as an employer

Working in tandem with Government and individuals themselves, employers have an important role to play helping their employees be smart with their money.

Employers are uniquely positioned to deliver financial advice at the moments when their employees most need help. They are often engaged with many of their employees’ key life events, including starting work, changing jobs, becoming parents and retiring. As such, employers are well-placed to offer structured guidance and timely signposting to their staff.[1]

Furthermore, CIPD research suggests that many large organisations view supporting financial wellbeing as an ethical responsibility, and 85% cite their reason for expanding financial wellbeing initiatives as being ‘the right thing to do’.[2] This is all part of building an organisation that employees are proud to work for.

How you can help

Here are three benefits which will empower employees to make the right financial decisions.

Financial education

Education really is the key to financial wellbeing. It helps employees join the dots across all benefits and helps them understand how to use these benefits to help with their own financial issues, plans and goals.

Many of us received little or no education in financial matters at school. As a result, many people struggle with how to manage money – but may be unwilling to admit gaps in their knowledge for fear of looking silly.

Employees need appropriate information, education and advice in order to help them achieve good outcomes from their decisions to save, spend and borrow. This can be anything from how to decode their payslip to understanding how to save for retirement.

Employers have a key role to play here. They can enable employees to make informed decisions, as well as help them feel more in control of their finances. Organisations can help their staff through signposting them to relevant guidance, information and support, as well as providing this themselves, either directly and/or through a trusted partner.

There is a wealth of financial advice available via the internet, which is good, but so much information to sift through can feel overwhelming. It helps to have guidance come from one trusted source, i.e. an employer - ideally in a format that makes the advice easy to digest and act on. For example, you could offer webinars or conferences, clinics, 1:1 financial mentoring, support groups, assessments and budgeting advice.

Employee Assistance Programme (EAP)

This is a confidential service where staff can get help with personal or workplace issues that might be impacting their performance, wellbeing, mental or physical health. When it comes to financial wellbeing, an EAP is a useful resource. It provides a one-stop shop for employees to access debt counselling, financial advice, and more.

Many EAP providers have links to charities or government organisations and users can access calculators for credit card debt, pensions, and money health checks. They may also offer advice on housing issues like mortgages and tenancy agreements. What’s more, the phone line can be extremely valuable to employees whose money worries are affecting their mental health but don’t feel able to confide in a friend or family member. 

Wage streaming / flexible pay

This gives employees access to a portion of their wages as soon as they have worked the hours, rather than waiting until the end of the monthly pay cycle. The idea is to alleviate cash flow problems along with the resultant financial stress and potential for going into debt. For example, for many people having to meet an unexpected expense mid-month could mean resorting to a payday lender with sky-high interest rates.

Accessing wages before payday gives employees a higher sense of control over their cash flow and budgets. As an employer, you set a limit on how much of their pay packet staff can stream per month – usually this is around 30%-40%.

For employees who want greater financial flexibility, wage streaming is a handy way to access funds without borrowing. Other workplace lending schemes rely on credit checks, and those who need it most may not be eligible.

This benefit works well for employers with shift workers. Providers also offer fintech-enabled features like wage tracking (visibility of earnings in real time) and gamified savings accounts to encourage financial resilience.

Financial wellbeing doesn’t have a one-size-fits-all approach. Understanding your workforce and their needs is essential to deliver the right help and support. It’s also important to offer a range of benefits and services so employees can choose what is right for them and their circumstances.

For more information on how to support your employees and help them make healthy financial choices, view our financial wellbeing report.

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[1] Money & Pensions Service, ‘Thematic Review: How can we improve financial wellbeing in the workplace?’. Accessed at https://www.fincap.org.uk/en/thematic_reviews/how-can-we-improve-financial-wellbeing-in-the-workplace(9 June 2020)

[2] CIPD, ‘Employee financial well-being: why it's important,’ January 2017, p.23. Accessed at https://www.cipd.co.uk/Images/financial-well-being-why-its-important-report_tcm18-17441.pdf (4 June 2020)