Context

The Chartered Institute of Personnel and Development (CIPD) commissioned this study as part of a response to a policy need that had been identified - to encourage employers to move from reactive to preventative approaches to dealing with staff well-being. As part of this, the CIPD recommended that financial well-being should be regarded as an integral part of employee well-being. The study is intended to build the case for taking action and is primarily targeted at employers and HR professionals, policy-makers, benefit advisers and providers, and money charities.

This report is one in a series of four from the same research project.

The research process adopted included a review of recent academic literature in the field that was used to produce a series of questions then put to three expert workshops (containing 25 participants in all) from which the reported findings were drawn.

Key findings

• • 8% of UK workers report taking time off because of financial stress, and those with high stress being absent overall almost twice as often as those with low stress.
  • In 2007, mental health problems were estimated to cost UK employers £8.4 billion a year in sickness absence and £15.1 billion in lost productivity.
  • The UK economy lost £120.7 billion and 17.5 million hours to financial stress in 2016.
  • Poor employee financial stress was estimated to have cost employers 4% of productivity for every £1 million spent on payroll
  • 19% of employees have lost sleep due to financial worries. At the same time, financial worries slow down employees’ ability to process financial information.
• • Employees aged 18-25 face challenges of leaving home, learning to manage their own budgets and often of dealing with student debt. They tend to have the lowest money management skills and lower incomes overall.
  • From their late 20s to mid-40s, employees tend to face the financial challenges of supporting families, with rising childcare and housing costs. They may thus have greater need for income protection and to plan for retirement and are less financially resilient than the retired; about a quarter of those aged 25-34 have a debt problem.
  • From their late 40s, employees need to maximise their retirement provision and be able to handle life crises, including disability, death of a partner and redundancy.
• • Employee financial pressures are likely to increase into the future, notably with more expensive higher and vocational courses and costs, continuing rises in housing costs and a greater need for employees to contribute more to their retirement provision.

Recommendations

• • Sustain investment in financial education through schools, colleges, universities and vocational qualifications.
  • Target financial education at those more in need, including those with limited digital access, low earners, those in precarious employment and people receiving benefits.
  • Support employers to support their staff.
  • Promote a wider culture of personal financial responsibility.
• • Encourage clients to support financial well-being rather than crisis recovery.
  • Make financial planning tools that have been developed for wealthier people more widely available across organisations of all sizes.
  • Target employees of all ages.
  • Use plan English and behavioural insights to ensure better take-up and success of financial capability initiatives.
• • Review staff support needs and build a strategy for well-being, monitoring and evaluating it regularly.
  • Integrate financial well-being into a holistic employee well-being strategy.
  • Promote support available to staff.
  • Use significant life events to remind staff of the need to examine their wider financial situation.
  • Be aware that staff at all levels can be affected by financial pressures.
  • Be clear about your offer and where responsibility for decision-making lies.
  • Offer a fair pay and benefit package to staff, with opportunities for tailoring to individual needs.
  • Provide an employee assistance programme.
  • Appoint financial well-being champions to support the strategy.
  • Explore and use free government support.

Points to consider

• • The report is intended to build a case for action rather than as an exhaustive literature review.
• • Specific aspects and findings may change over time and with the political and economic context.
  • As it reflects round table expert opinion only, generalisability beyond the views of this group cannot be determined from this data.

Full report

Employee financial well-being: why it’s important