Gethin Nadin
Chief Innovation Officer, Zellis
The pressure continues to bear down on employers to help their people navigate the worst cost-of-living crisis for decades. Dramatic rises in the costs of fuel, energy, and food are now having a profound impact on the wellbeing of millions of employees in the UK. The situation looks even more challenging in light of the gloomy economic outlook for 2023.
In the first part of this report, our research exposed how a lack of confidence using numbers, along with low numeracy skills, affects people’s financial wellbeing and, consequently, their wider mental health.
We found that only one in seven employees in the UK and Ireland actually feels very confident using numbers at work and in their everyday lives.
Employees who lack confidence with numbers feel less productive, less secure in their jobs, and less employable. But we also found that this lack of confidence was affecting wider wellbeing and home life. Alarmingly, a quarter of employees who have low confidence with numbers told us that this negatively impacts their mental health (through anxiety or depression), and almost 20% said it holds them back when supporting their own children.
Payroll accuracy and understanding is more critical than ever
It’s no surprise that people who feel less confident with numbers and lack numeracy skills are less engaged with their personal finances, including pay and benefits. They’re less likely to check their payslips regularly and less able to understand the information presented to them. But most worryingly, we found that they are less able to spot errors relating to their pay and benefits. They simply don’t have the knowledge or confidence to make informed or proactive decisions. During the current crisis, the impact of this is magnified.
Employers therefore need to help those employees with low numeracy skills to understand their payslips and to feel more comfortable asking questions and raising concerns. This means simplifying terms, removing acronyms, and presenting information clearly and concisely.
Perhaps most critically, they need to ensure accuracy in their payroll at all times.
Recent high-profile payroll errors such as those at Next, Asda, and EY have highlighted the implications of payroll errors for employees who are struggling to pay bills and cover day-to-day expenses. As People Management reported: “It’s a real-world issue that has implications for workers’ wellbeing, as well as their ability to buy basic goods, pay bills, and not fall into debt.”
Payroll errors are a real-world issue that has implications for workers’ wellbeing, as well as their ability to buy basic goods, pay bills, and not fall into debt.”
People Management
Indeed, our research found that 51% of employees feel a mistake with their pay would lead to stress and anxiety. And 50% state that it would lead to financial difficulties, such as not being able to pay rent. Employers simply cannot afford these types of mistakes when the stakes are so high.
Overall, a staggering 59% of employees state that payroll errors can negatively impact their mental health. And this figure rises to 78% among those who have a diagnosed mental health condition. This clearly shows the role that payroll plays in employee wellbeing, yet many organisations are failing to make the connection between how we pay people and their overall health.
Best practice guidance for employers to promote financial wellbeing
Evidently, employers have an almighty task on their hands to help their people through what will undoubtedly be a very trying and worrying few years, and particularly those employees that lack confidence and skills with numbers.
Of course, no employer will be able to stop the financial pressures that their people are feeling throughout this cost-of-living crisis. But every employer can provide a framework and starting point for people to better manage their finances to cope with these pressures. They can also provide support and services for those people who are struggling to make ends meet, and for those whose mental health is being impacted as a result.
But for employers, the difficulty is working out how to go about tackling such a wide-ranging and complex challenge, where there simply aren’t many easy answers or quick fixes. When there are so many measures that employers could take, the key is to identify the behaviours we can influence that will have the biggest impact on employee financial wellbeing, both in terms of how they are able to manage their finances and in how they are able to protect their future.
Financial wellbeing is ultimately about three things: having control over the money that comes in and goes out on a regular basis, having the financial and emotional resilience to cope with the things that happen in our lives, and how we feel about the part money plays in our lives.
One of the most impactful things that employers can do when it comes to financial wellbeing is to help employees develop a positive relationship with money, where they control money, rather than money controlling them. Employers should be helping their employees to view money as a positive enabler in their lives, not as something that’s confusing, scary, and difficult to manage.
This report aims to help employers to do just that. Bringing together the thoughts and insights of leading experts in financial wellbeing, payroll, and remuneration, we present best practice guidance for employers to revise their financial wellbeing and payroll strategies.
Of course, it’s vital that employers listen to their employees to better understand their immediate and longer-term needs, opening up ongoing dialogue. With that in mind, the report shares new research findings detailing how employees feel their employers can better support them over the coming years. This includes ways in which payroll can be improved to make it more accessible and engaging. It also covers the education, services, and financial products that employees feel would improve their own financial and mental wellbeing.
Critically, the report highlights the need for employers to take a strategic and consistent approach to financial wellbeing, focused on driving the behavioural changes which are so critical for employees to feel more confident and in control of their finances during this crisis.
This in turn will lead to better decision making and a more sustainable approach to financial management and planning. All of this will be absolutely essential in tough economic times.
Gethin Nadin
Chief Innovation Officer, Zellis
Research Methodology
Zellis commissioned comprehensive independent research among a wide cross-section of the workforce:
2,010 online interviews with employees in the UK and Republic of Ireland; 80% worked for organisations in the UK; 20% worked for organisations in Ireland.
The respondents worked for organisations of all sizes; 50% worked at companies with 1,000 or more employees.
Respondents worked in different industries including healthcare, government/public sector, retail, hospitality and leisure, transport and logistics, manufacturing, and construction.
73% of respondents worked full-time and 27% worked part-time.
57% were on a fixed salary and 43% were paid on an hourly basis or at a variable rate.
All research was conducted by Insight Avenue in September 2022
Note: Totals in charts/tables for single-coded questions sometimes add up to more or less than 100% due to rounding.
Our expert contributors
The following people provided interviews to add context and insight to the research data. We are grateful for their input and support.
Charles Cotton
Senior Performance and
Reward Advisor, CIPD
Charles Cotton is a CIPD senior adviser. He directs its reward research agenda and recently led on how HR teams can help tackle in-work poverty and support their staff during the cost-of-living crisis. He is also responsible for the CIPD’s public policy work on pay and benefits and has given evidence to several select committees, such as on executive remuneration and ethnicity pay reporting, as well responding to various consultations, including on pensions, the national minimum wage, and corporate governance.
cipd.co.uk
Ian Hodson
Head of Reward and Deputy Director
of HR, University of Lincoln
Ian Hodson is responsible for oversight of the university’s operational and strategic approaches to reward, as well as recognition and benefits. Overseeing HR systems including payroll, HR database, expenses, absence, and self-service, he has long advocated for more meaningful employee pay advice. Under his steerage, the university is supporting employees’ financial wellbeing with both proactive guidance and reactive support, while tackling the rising competition for talent with a more progressive reward system.
lincoln.ac.uk
Our expert contributors
The following people provided interviews to add context and insight to the research data. We are grateful for their input and support.
Jacqui Summons
Chief People Officer at EMIS Health,
Non-Executive Director at Zellis
Jacqui Summons has extensive international HR experience gained during more than 30 years in CHRO and senior HR positions, at leading global organisations including GlaxoSmithKline and Standard Chartered. In her current role at EMIS Health, she led the HR response to the pandemic at EMIS, successfully navigating through the impact in the UK and India. She also brings her expertise to the role of non-executive director at the UK and Ireland’s leading payroll provider, Zellis.
emishealth.co.uk
Gethin Nadin
Chief Innovation Officer, Zellis
Gethin Nadin is an award-winning psychologist who has been helping some of the world’s largest organisations to improve employee experience and wellbeing for two decades. He has been featured in major titles including Forbes, the Guardian, and Financial Times, as well as key HR, reward, and pensions publications. Gethin has been listed as a Top 101 Global Employee Experience Influencer and was named an Inspiring Leader 2021. He has published two bestselling books: A World of Good: Lessons From Around the World in Improving the Employee Experience and A Work In Progress: Unlocking Wellbeing to Create More Sustainable and Resilient Organisations.
zellis.com
*Part 02:*
Key actions and strategies for employers
to undertake
Part 02
Key actions and strategies for employers to undertake
Six focus areas to drive behavioural change and improve financial wellbeing
Employers need to think about how to improve employees’ financial wellbeing and mental health on a consistent, long-term basis. This means focussing on driving positive behavioural change on financial management and planning. This is the only way to achieve effective and sustainable improvements in financial wellbeing.
We believe there are six key areas where employers can help to effect behavioural change in their employees when it comes to financial wellbeing. Any effort and investment should target at least one of these.
1. ACCESS TO AFFORDABLE CREDIT AND FINANCIAL SUPPORT
Removing the cost of existing debt is a straightforward way for employers to ease some of the pressures caused by the cost-of-living crisis. It gives employees more control over their finances and helps them to become more optimistic about their financial futures. Payroll lending provides employers with a low-cost, risk-free way to help employees who are struggling with higher interest rates get back on top of their finances.
Growing numbers of employers are partnering with companies that provide responsible financial products and services (such as loans, advances, savings, and financial education) to employees. Critically, this mitigates the need for employees to take on high-risk debt, such as payday loans, to cover money emergencies.
A major challenge for employers is trying to change financial behaviours in a way that improves long-term financial prospects, while also dealing with the immediate money worries people face now. Employers need to be sensitive to the fact that some may be having to make very tough decisions about how they spend their money. It’s no good continuing to communicate with people about savings if what they actually need is information on how to access food banks and government income support.”
Charles Cotton, Senior Performance and Reward Advisor, CIPD
2. HOLDING INSURANCE AGAINST KEY RISKS
The last few years have highlighted the need to be prepared for the unexpected.
Employers should be encouraging employees to do as much as they can to create a buffer against financial risk for themselves and their families.
This means making it easy and cost-effective for employees to insure against key risks through income protection schemes and critical illness cover.
Understanding of these benefits remains relatively low within the UK and Ireland workforce. Employers should therefore focus on educating employees about the schemes that are available and why they are so important.
Income protection is an employee benefit that can have a significant positive impact on an employee’s life. According to the Association of British Insurers, 97.8% of claims were paid out in 2018.
As well as additional free services to get employees back on their feet, income protection as a benefit ensures employees protect themselves against one of the most common reasons a person falls into problem debt – falling ill and being unable to work. It also provides employees with a greater sense of control and confidence at a time when many people are understandably anxious about the consequences of not being able to work.
When we look at the primary causes of problem debt in the UK, they are almost always due to a series of quite predictable life events that many employees will face. Job loss, death of a spouse, and long-term ill-health have all been found to drive employees into serious debt. However, the negative financial impact of these life events can be mitigated or softened through insurance products that exist within many employee benefit schemes.”
Gethin Nadin, Chief Innovation Officer, Zellis
3. INCREASED AWARENESS OF SPENDING
Despite the financial pressures they are experiencing, most people have very little grasp of how much money they are spending and how they are spending it. Encouraging employees to become more aware of their expenditure is an important part of financial wellbeing. In fact, it’s arguably the most important short-term behavioural change that employers can influence.
Employee discount schemes are already a common feature of most benefits strategies, although their value is often overlooked by employees. But with rising costs, such as the recent National Insurance increase, employers need to demonstrate how these discounts can offset many of the cost-of-living increases employees are facing.
With the average UK household spending £5,000 a year on food shopping, employees switching to a discounts and cashback platform could see an annual supermarket shopping bill decrease by around £250, depending on the scheme and the supermarket.
While employee benefits initiatives should continue to be directed at all employees and all salary brackets, there is a strong argument the current crisis calls for a greater focus on lower-paid workers. Benefits can really stretch the value of these employees’ wage packets.
Research from the Joseph Rowntree Foundation has shown how lower-paid workers value benefits which help with day-to-day living essentials, rather than the nice-to-haves.
Lower-paid workers are typically offered lower flexibility but could significantly benefit from getting more. This could mean remote working to reduce their travel costs and ease childcare pressures, or more flexible hours to avoid peak-time travel fares. These types of measures don’t cost a business much, but they can have a massive positive impact for employees.
Similarly, salary sacrifice in exchange for non-cash benefits provides a helpful way for employees to navigate rising tax costs while still being able to buy some of the things they need. Whether it’s pensions, training, or travel, these arrangements make employees feel like they’re getting a good deal. For instance, a cycle-to-work scheme can help employees to reduce their travel costs (as well as cutting carbon emissions).
We’re already seeing a worrying pattern of employees reducing their pension contributions in order to get more money into their pockets today. This is totally understandable, but employers have a duty to highlight the risks and consequences of doing this. This could be through financial modelling to show the impact of a 2% reduction in pension contributions for a 25-year-old today when he or she reaches retirement age. Of course, the current situation is hugely difficult, but the answer can’t simply be to store up even greater problems further down the line.”
Jacqui Summons, Chief People Officer at EMIS Health, and Non-Executive Director at Zellis
4. BETTER UNDERSTANDING OF FINANCIAL PRODUCTS AND SUPPORT
Higher financial literacy leads to greater financial wellbeing and reduced anxiety about money. This is why financial communication and education is so vital.
Many studies have shown that spaced-out learning, delivered in short bursts of fewer than five minutes, helps people to retain knowledge better, particularly for complex topics such as financial products. This approach to learning enables employees to establish better, lasting habits, and plays an important role in fostering better financial wellbeing and a sense of control.
Financial education products help and motivate employees to make small, incremental decisions that will save them money and build their financial confidence. They allow employees to tackle their financial situation one small step at a time over the space of a few months, rather than becoming overwhelmed and disillusioned by trying to do everything at once.
Another way in which employers can make an impact is by educating employees on the wide range of state benefits that may be available to them, helping them to understand eligibility and how to navigate the application process.
HR teams and business leaders urgently need to start looking at benefits through the lens of financial wellbeing, and with the cost-of-living crisis at the forefront of their minds. Benefits shouldn’t just be thought of as a recruitment and retention tool in the current environment. They have become more fundamental to people’s lives and struggles.”
Charles Cotton, Senior Performance and Reward Advisor, CIPD
What is the annual value of unclaimed benefits and entitlements people are missing out on?
- £10 billion
- £20 billion
- £30 billion
Government figures show that a many benefits and tax credits still see alarmingly low uptake.
£20 billion+ went unclaimed last year due to households being unaware of their entitlements.
By providing employers with education and access to specialist advice and support on state benefits and tax credits, employers can open up significant new streams of income, particularly for lower-paid workers who are struggling the most.
Government figures show that many benefits and tax credits still see alarmingly low uptake.
went unclaimed last year due to households being unaware of their entitlements.
By providing employers with education and access to specialist advice and support on state benefits and tax credits, employers can open up significant new streams of income, particularly for lower-paid workers who are struggling the most.
5. PLANNING FOR
FUTURE GOALS
Part of changing an employee’s relationship with their finances is positioning money as a positive and useful tool in achieving what they want in their lives. Whether that’s a new home, a holiday, a child’s education, or a wedding, money (and savings in particular) should be seen as a way to achieve a goal.
When employees can see themselves getting closer to one of the things they really want in life, they generally engage better with their finances. They tend to balance the wants and needs of the present with those of future. This empowers employees to make decisions today that have a positive impact tomorrow. For example, rather than seeing the negative aspects of putting £100 a month aside (e.g. one fewer night out or less flexibility to buy what they want), they start to see that £100 as an additional night on their future holiday or a step closer to getting the home of their dreams.
People with financial security use money in ways that are constructive, intentional, and aligned with their sense of purpose. They tend to feel better after spending or utilising money, not worse. That’s very different than living in financial insecurity, in which no amount of money ever feels like enough, and you’re constantly spending it on quick fixes here and there to survive or just to escape uncomfortable emotions.”
Gethin Nadin, Chief Innovation Officer, Zellis
6. ACCUMULATION OF LONG-TERM WEALTH
One of the most impactful ways for employees to create positive financial wellbeing for the future is to build medium- and long-term savings. Having a buffer that can soften the blow of everyday expenses like car or home maintenance can help to protect employees from the strain so often caused by unexpected expenses.
Building some long-term wealth is within the reach of almost every employee, beginning with a very small commitment to put any amount of money to one side on a regular basis. Starting as early as possible is critical to building this wealth. Those people who start longer-term savings earlier in their lives tend to have better financial wellbeing. Whether this investment exists as a normal savings account, an ISA, or indeed a pension or retirement fund, setting contributions to be regular and not easily accessible drives the most successful outcomes.
Half of UK employees have less than £500 in savings, so encouraging any form of saving is hugely beneficial to building long-term, sustainable wealth in later life.
Rising interest rates have finally made savings a worthwhile endeavour again. Those that can afford to build up a pot should be encouraged to do so. Share-incentive plans can be an extremely effective way for companies to incentivise employees to save more and build up their financial resilience.
Of course, persuading people who are struggling to make ends meet to put money aside for the future can be difficult. But employers need to help people visualise the benefits of doing so. Even putting £10 into savings every month will provide people with a pot of money which they can use for unexpected expenses in the future. And the more that pot grows, the more engaged and in control they will feel.
Establish effective communication
Unfortunately, while employees seem to feel more comfortable discussing issues relating to their mental health, this is yet to extend to financial wellbeing. There remains a strong stigma associated with financial difficulties, which means that many people simply don’t want to talk about their finances. Interestingly, this extends to all levels of the workforce – from low-paid workers through to top earners. The latter can often feel greater embarrassment about the fact that they need financial support.
This makes it very important for employers to have mechanisms in place which will give them the best chance to spot issues before they become too severe. As with all aspects of wellbeing, line managers are best placed to identify issues. However, they need the awareness, support, and training to identify and engage with team members that might be facing financial difficulties. They also need the knowledge to point employees towards appropriate help and services.
According to research from the CIPD, three in ten UK employees admit that money worries have affected their performance and behaviour at work. Line managers need to be conscious of this and should have the skills and confidence to talk about it sensitively and confidentially with employees as part of a regular one-to-one dialogue. Anxiety about money has a huge knock-on effect on almost every aspect of people’s lives – sleep, health, relationships, and parenting.
The shift to remote and hybrid working means that many of the most effective everyday touchpoints for financial wellbeing communications have disappeared. Employers can’t always reach people with a poster advertising the wellbeing helpline or a lunchtime session on the Employee Assistance Programme. So, they need to think about creating new interactions remotely, which present themselves to employees at the right times, and resonate with how they might be feeling.
It’s about showing employees that the support and services are there for them.
Ultimately, employers can’t provide a safety net which catches people when they make poor or ill-informed decisions. But what they can do is encourage and enable people to make smarter and more informed decisions and, ultimately, change behaviours in a positive way. Employers can help employees to have a better understanding of their pay and spending, and to be more aware of the support, benefits, and services available to them, both through the organisation itself and via wider channels.”
Jacqui Summons, Chief People Officer at EMIS Health, and Non-Executive Director at Zellis
Timely, relevant communications are also critical. Recognise the fact that employees will have specific points in the month where they feel particularly anxious about money. For instance, on payday when people receive their payslips (and also when most of their direct debits leave their account) people are likely to feel under enormous stress when they see how much (or little) money they have left for the rest of the month. Again, towards the end of the month, people are more likely to be struggling to make payments and buy essentials as their money is running out.
These are the points in time when employers should be reminding people about the support that’s available if they are feeling overwhelmed about their financial situation, highlighting services such as payroll borrowing and shopping discounts.
Commit to a policy and vision for financial wellbeing
While most organisations have developed dedicated strategies and policies to set out their approach and commitment to mental health, many are yet to do so in relation to financial wellbeing. Most employers have a range of different initiatives designed to support employees with their finances, but these are often presented as standalone services and offers, rather than part of an overall programme or package.
Employers should be looking to develop a unified policy for financial wellbeing, which articulates their commitment to promoting financial wellbeing and supporting all employees, whatever their financial circumstances. The policy should acknowledge that, as income providers, organisations play a critical role in their employees’ financial wellbeing.
Having such a policy makes it much easier for employers to communicate with employees on all areas of financial wellbeing. It also allows employees to understand exactly what help is available.
A financial wellbeing policy should form an integral part of a holistic wellbeing strategy
1. Let the workforce know that they can get free, confidential, and independent money and debt advice from the government’s Money and Pensions Service.
2. Make sure the workforce is fully aware of all the benefits you currently offer and how to make the most of them.
3. Start to normalise conversations about money worries at work; showing concern and empathy can help to break down any stigma.
Employee Financial Wellbeing (CIPD)
Our own research has found that people who work for an employer that has a clear financial wellbeing policy place a very high value on this, and they’re far more likely to look for the same when assessing any potential future employer.”
Charles Cotton, Senior Performance and Reward Advisor, CIPD
Measure performance to drive success
One of the most difficult aspects of any financial wellbeing programme for employers is how to measure effectiveness and impact. It’s notoriously difficult to track and quantify the success of such programmes, particularly where behavioural change is the desired outcome.
However, by focusing on the six areas outlined in the previous section, employers should be able to measure the following outcomes:
Employees have a higher sense of financial control.
Employees are setting and pursuing long term goals.
Employees’ confidence in dealing with money matters is improved.
Employee financial security builds, so they can ‘take a knock’ and have a savings buffer.
Employee financial resilience improves; they can effectively manage debt and are actively saving money.
Regular employee surveys can gauge how people feel about their financial situation and levels of confidence when making financial decisions. Measurement can also be carried out through payroll and benefits data. For example, you could track how many people are registering for payroll savings schemes or taking advantage of available offers and discounts.
Taking one step further, employers can look at how improvements in these metrics impact performance and productivity, sickness and absence levels, and even customer satisfaction. Of course, it may be difficult to attribute uplifts in these areas to one specific factor, but organisations may start to see a general upward trend as financial wellbeing improves across the workforce.
Pay and payroll are integral to financial wellbeing
The current cost-of-living crisis is exposing the need for better financial education and healthier money behaviours right across the UK and Ireland workforce. But, more than that, it’s exposing the close links that exist between pay, numeracy, mental wellbeing, and physical health.
This report has highlighted the need for employers to approach financial wellbeing from a behavioural perspective. Focus on providing people with a framework for dealing with current and future financial pressures. Ultimately, it’s about giving people a starting point for a more considered, informed, and proactive approach to money.
The unfortunate reality is that a large proportion of people have a negative relationship with money, seeing it as something that works against them, not for them. They are fearful of money and reluctant to engage with it.
There’s no denying the fact that more effective financial education and wellbeing strategies from employers and government would put people in a better position to weather circumstances like the current crisis. They’d have things in place to help them through the challenges: better knowledge and behaviours, as well as actual savings and insurance policies.”
Gethin Nadin, Chief Innovation Officer, ZellisThis report has highlighted the need for employers to approach financial wellbeing from a behavioural perspective. Focus on providing people with a framework for dealing with current and future financial pressures. Ultimately, it’s about giving people a starting point for a more considered, informed, and proactive approach to money.
The unfortunate reality is that a large proportion of people have a negative relationship with money, seeing it as something that works against them, not for them. They are fearful of money and reluctant to engage with it.
Perhaps more than anything, therefore, employers (as well as the financial services industry) need to find a way to remove the stigma attached to talking about money. They need to work to create an environment where people are more open to discussing their financial circumstances, and where somebody worried about money can go to their manager for help.
Employers mustn’t shy away from these conversations. While they may not be able to stop people getting into financial difficulties or fix problems when they arise, they can play a critical role in helping people to manage these situations and find a way forward. Where people are feeling stressed and anxious, employers can direct them to the right support for dealing with the emotional impact of financial troubles. It’s often simply about providing people with ways to cope with the worry caused by money, rather than necessarily trying to solve the financial problem itself.
Across all industries, employers are committing themselves to doing more to help employees manage and improve all aspects of their wellbeing. But far too many continue to overlook the role of pay and money on mental and physical health. People need to receive a fair, adequate, and predictable living wage, accurately and on time, without fault. They need the education and tools to better understand and engage with their pay, and to manage their money in an informed and proactive way.
By ensuring that pay is accurate, timely, and accessible to all sections of the workforce, payroll professionals can deliver a starting point for better financial behaviours, protect employee wellbeing, and build trust with employees at a time of economic gloom.
If you are interested in more information on this research, or how Zellis can help you boost employee financial wellbeing, contact us:
tellmemore@zellis.com
0800 042 0315
