Financial capability
Employees in crisis
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Focus
When it comes to day-to-day money management, employers are underestimating how many of their people are at crisis point and feel vulnerable. The strain for employees in the days leading up to payday is clear but there appears to be a disconnect between this and the employers view of how well their employees are coping.
Have you seen an increase in absence in the run up to payday? A review of policies and procedures including expenses and travel to support employees throughout the pay cycle can help.
Everyday money management
Question: Thinking about your money management, which of the following most closely aligns to how you manage your everyday finances?
We see an increase in those who are in crisis or feeling vulnerable with their everyday money management - more than 1 in 5 (23%) employees.
More than 1 in 4 (28%) said they were coping but would struggle if an unexpected expense came their way. Often, we turn to our savings when things happen or we need emergency funds – for these employees, that buffer is lacking.
Question to employers: "Which of the following do you think best describes the majority of your employees financial health across the following areas?"
As you can see from the employee reality above, employers believe their workforce are coping with their everyday money management when in reality, many employees are not. An obvious disconnect arises here.
Question: Thinking about your wellbeing throughout the month, how do you feel about your finances at these times?
We see a growth in those feeling concerned or negative and not able to cope between paydays. This increases considerably in the run up to payday with more than 1 in 3 feeling that way.
This is in stark contrast to the employer view where the perception is more than 4 in 5 are coping and in control.
The impacts of the Covid-19 pandemic
The last year many people have reconsidered what’s important - incuding how they spend their time and how they manage their money. For some this has been through positive circumstance such as an increasing savings capability supporting financial health. For others, this has been forced change due to reducing capability in a number of areas.
Question: Have any of the following aspects changed since the Covid-19 pandemic started?
Employee confidence
Confidence in future finances
Confidence in future finances has grown for early and mid-career age groups more so than older colleagues who largely remain unchanged. Interestingly, when we look at decreasing confidence in future finances, we see less volatility between the age groups.
The value I place on my employee benefits
The value placed on employee benefits has increased for the early and mid-career groups again and remains largely unchanged for a significant number of mid and late-career colleagues. Only a small percentage of employees feel the value they place on benefits through the workplace has decreased over the last 12 months.
LCP viewpoint
George Currie, Consultant, LCP
Over the last two years, our financial wellbeing surveys have done a fantastic job of pinpointing the challenges faced by employees and the opportunities for employers to help them overcome them...
...From a financial perspective, no challenge is greater than not being able to make ends meet and the sense of financial crisis that comes through in the results of our surveys is palpable.
People are really feeling the pinch. They are feeling more vulnerable financially than they have in any of our surveys to date, with concern doubling since our first report in 2020. Inevitably, this has led to a decline in employees’ sense of security and stability. These are symptoms of a deeper malady that lies at the heart of the modern workplace: entrenched financial insecurity.
We can see this in the significant increase in people who feel they’re unable to cope financially between paydays, particularly in the last few days before their next payday. We can see it in the number of people who need support with everyday money management and budgeting. And, most importantly, we can see it in the number of people whose confidence in their future finances has decreased over the last twelve months, especially amongst younger cohorts.
The good news is that employers can help. The extent to which employees value their employer benefits has increased significantly over the last 12 months . This puts employers in a powerful position to help employees deal with their financial challenges through financial guidance, default propositions (like a good quality pension arrangement), and debt management facilities.