Time for a financial check in - Why financial wellbeing is just as important

As we usher in a new year, it is an opportune time for HR professionals to reassess and recalibrate their strategies for employee financial wellbeing.

With the cost-of-living crisis, rising inflation, and the ongoing economic uncertainties brought about by the pandemic, financial health has become a pressing concern for many employees.

The Working Lives Scotland 2023 report revealed that one in five working people living in Scotland are losing sleep due to money worries, a clear indication of the financial stress employees are under.

Similarly, a study by GoodHabitz found that nearly a third of employees feel their employers are not doing enough to support their financial wellbeing. These findings underscore the urgent need for employers to prioritize financial wellbeing in their HR strategies.

Here are some strategies HR leaders can implement to help employees navigate their financial concerns at the start of the year:

1. Promote financial education

Firstly, HR should conduct surveys to understand the specific financial education needs of their workforce. This step is crucial as it tailors the program to address relevant topics such as budgeting, investing, retirement planning, or debt management, ensuring that the content is both practical and engaging for employees.

Once the needs are identified, HR can curate a comprehensive financial education program. This could involve bringing in external financial experts or consultants to conduct workshops and seminars. These sessions should be scheduled regularly and designed to be interactive, encouraging participation and discussion. Online resources, such as webinars and e-learning modules, can complement in-person training, offering flexibility and catering to different learning preferences.

To further embed financial education into the company culture, HR can integrate these topics into the onboarding process for new employees. This not only sets the tone for a financially literate workforce but also demonstrates the company’s commitment to its employees’ overall well-being from day one.

Additionally, HR can leverage internal communication channels, like newsletters, intranet, or regular meetings, to share financial tips, market updates, and success stories of employees who have effectively managed their finances. This approach keeps financial education front and center, maintaining ongoing engagement.

Recognizing and rewarding progress is another effective strategy. HR could establish recognition programs for employees who make significant strides in their financial journey, whether it’s paying off debt, reaching a savings goal, or effectively planning for retirement. Such acknowledgments not only motivate the individual but also encourage others to engage with the financial education offerings.

Furthermore, HR can facilitate the formation of peer-led financial education groups or forums within the company. These platforms can serve as a safe space for employees to share experiences, challenges, and advice, fostering a community of learning and support.

2. Provide access to advisory services

HR leaders can facilitate access to financial advisors who can provide personalized advice to employees.

This can be particularly beneficial for employees nearing retirement, as research by the Reward and Employee Benefits Association revealed that one in ten working adults have withdrawn their pension savings early.

Advisors help employees understand their retirement options, such as 401(k) plans, IRAs, and pension plans. They assist in setting retirement goals, understanding the impact of contributions, and planning for future expenses in retirement.

Any advisor should be able to help employees navigate:

1. Investments: Employees receive guidance on how to invest in stocks, bonds, mutual funds, and other investment vehicles. This advice is tailored to each employee’s risk tolerance, investment goals, and time horizon.
2. Tax Planning: Financial advisors provide information on tax-saving strategies and how different types of investments are taxed. They help employees understand the tax implications of their investment choices and compensation packages.
3. Estate Planning: Advisors assist in planning for the management of an employee’s estate after death. This includes advice on wills, trusts, and how to ensure that assets are distributed according to the employee’s wishes.
4. Insurance Planning: Guidance on various types of insurance, such as life, health, disability, and long-term care insurance, to protect against financial risks.
5. Debt Management and Budgeting: Advisors offer strategies for managing debt, including student loans, credit cards, and mortgages. They also help in creating a budget to manage expenses and save effectively.
6. Education Funding: Assistance in planning for children’s education expenses, including advice on saving for college and understanding financial aid options.
7. Employee Stock Ownership Plans (ESOPs): For companies offering stock options to employees, advisors can provide guidance on how to manage these assets effectively.

3. Enhance employee benefits

Benefits like retirement plans, health insurance, and flexible spending accounts can significantly impact an employee’s financial health.

A key area of focus is retirement plans. Offering comprehensive retirement options, such as robust 401(k) plans with generous company matching, can significantly enhance an employee’s financial security. Additionally, providing access to financial advisors who can assist employees in understanding and maximizing these benefits is a valuable service.

Health savings accounts (HSAs) and flexible spending accounts (FSAs) are another avenue for companies to improve financial benefits. These accounts can help employees manage healthcare costs more effectively, providing tax advantages and helping them save for medical expenses.

Stock options and profit-sharing plans are also powerful tools. By giving employees a stake in the company’s success, they not only incentivize performance but also provide a potential source of financial growth. These plans can be particularly attractive in start-ups or rapidly growing companies.

Debt management support and financial education programs can have a significant impact on an employee’s financial health. Offering services like student loan repayment assistance or counselling on debt management can alleviate financial stress and improve overall job satisfaction.

Employers should regularly review and update their benefits offerings to ensure they meet the changing needs of their workforce.

4. Support salary transparency

Open discussions about pay can help employees understand their earning potential and make informed decisions about their career progression. This can also help address pay disparities and promote a fairer workplace.

Some companies choose to have open salary policies where all employees’ salaries are visible to everyone in the organization. This level of transparency ensures that everyone is aware of what their colleagues are earning and can reduce pay disparities.

But not all businesses will be able to endorse such a policy. When this is not possible, businesses should seek to clearly outline the company’s pay structure and progression paths to aid transparency. Employees should know what they need to do to achieve a pay increase or promotion, and what different roles and responsibilities typically pay.

There are other steps businesses can take to ensure transparency, including being open during recruitment. Including the salary range in job postings is a straightforward way to be transparent. This approach sets clear expectations for potential employees and helps in attracting candidates who are likely to be satisfied with the offered compensation.

Conducting regular salary reviews and audits also helps ensure that pay scales remain competitive and fair. These reviews can assess market trends, cost of living adjustments, and performance-related pay increases, ensuring that salaries remain aligned with industry standards.

If pay disparities are identified, especially those related to gender, race, or other protected characteristics, employers should take steps to rectify these disparities. Being proactive in addressing such issues demonstrates a commitment to fairness and equality.

5. Encourage savings and investments

Employers can offer programs that encourage employees to save or invest a portion of their salary. This can be through matching contributions in retirement plans or offering employee stock purchase plans.

Don’t forget the financials

Financial well-being is often overlooked due to a variety of interrelated factors that span cultural, organizational, and individual perspectives.

Culturally, there’s a prevalent taboo surrounding the discussion of money. In many societies, talking about personal finances is seen as impolite or intrusive, which can prevent open conversations about financial wellness. This cultural norm extends into the workplace, where employees might feel uncomfortable discussing their financial concerns, and employers may similarly shy away from addressing these issues directly.

From an organizational standpoint, there’s often a focus on immediate business goals and productivity, with less attention paid to the long-term financial health of employees. Companies may prioritize benefits that have more immediate or visible impacts on employee satisfaction and morale, such as healthcare or workplace amenities, while overlooking the less tangible but equally crucial aspect of financial security.

Individually, a lack of financial education can contribute to the oversight of financial well-being. Many people are not taught how to manage their finances effectively, leading to a lack of awareness about the importance of financial planning and saving. Without this knowledge, individuals may not recognize the value of financial wellness or know how to achieve it.

Furthermore, there’s often a misconception that financial well-being is solely an individual’s responsibility and not an area where employers should intervene. This belief can deter organizations from offering financial wellness programs or resources, as they may feel it’s beyond the scope of their responsibility.

Lastly, the intangible nature of financial well-being can make it harder to measure and address. Unlike physical health, which can be monitored through clear metrics, financial health is more complex and multifaceted. This complexity can make it challenging for both individuals and organizations to assess and improve financial wellness effectively.

Time to change approach

Acknowledging and prioritizing financial well-being is crucial for several compelling reasons, impacting both individuals and organizations.

At a personal level, financial stability is a key factor in overall well-being. It’s not just about having enough money to meet basic needs; it’s also about feeling secure in one’s financial future. This sense of security can reduce stress and anxiety, which are often linked to financial worries.

When individuals are less stressed about their finances, they tend to have better mental and physical health. This improved well-being can lead to a higher quality of life, where people are more able to enjoy their personal and professional lives without the constant burden of financial strain.

In the workplace, acknowledging financial well-being can have significant benefits for both employees and employers. Financially secure employees are generally more focused, productive, and engaged. They are less likely to be distracted by financial worries, which can otherwise consume a considerable amount of mental energy. This increased focus and productivity can directly benefit the organization through improved performance and output.

Moreover, when companies support their employees’ financial well-being, it can enhance employee loyalty and job satisfaction. Employees are likely to feel more valued and supported, which can increase their commitment to the organization. This loyalty can translate into lower staff turnover rates, saving the company costs associated with recruiting and training new employees.

Furthermore, a company that acknowledges and supports financial well-being can enhance its reputation as an employer. In today’s competitive job market, offering comprehensive financial wellness programs can make an organization more attractive to potential employees. It positions the company as a forward-thinking, employee-centered organization, which can be a significant advantage in attracting top talent.

Lastly, promoting financial wellness contributes to building a more equitable and inclusive workplace. By providing resources and support, companies can help bridge financial knowledge gaps and reduce disparities that may exist among different groups of employees.

HRD Connect Curators of the New Business Landscape. HRD Connect produces industry-recognized content for senior HR leaders. Through articles, case studies, Q&As, podcasts, events, and more, we offer truly progressive and cutting-edge insights designed to help people leaders address core HR challenges and add greater value to their business.

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