By Charles Cotton, Senior Reward Advisor at the CIPD.

What’s the problem?  

A CIPD survey carried out in April 2020 of over 1,000 workers found 39% of them saying their financial security had worsened as a result of the COVID-19 lockdown. By contrast, just 12% reported an improvement during this period. 

Those most likely to report a worsening in their financial security include:  

• People whose household income is less than £20,000 a year – three fifths (60%) of low earners say their situation has declined while just three in ten (31%) of those getting £60,000 or more say the same. 
• Those working in Scotland – over half (53%) of those based in Scotland report a slump in their financial well-being. 
• Those with a disability – almost half (48%) say it’s got worse, by contrast just over one third of non-disabled people (35%) say the same.  
• Female workers – over two fifths (44%) of them report a worsening, by contrast just over one third (35%) of men say the same. Alarmingly, they are most likely to report that their financial safety has gotten much worse (17%) than men (9%). 

• Private sector workers – over two fifths (43%) of people state a deterioration, this proportion jumps to three fifths (60%) for those employed in the hospitality sector. 

 Why should the people profession and employers care? 

Employers should care about the financial well-being of their people. Research from the CIPD in 2017 found that for employees, money worries can result in:  

• fatigue due to lack of sleep 
• difficulty in concentrating at work 
• time spent dealing with financial problems (both at and away from the workplace) 
• poor health and well-being. 

The same research found that one in four employees say that money concerns have affected their ability to do their job. For employers, this has implications for productivity, customer service, innovation, and ultimately the bottom line. 

The financial health of your employees can also impact on how you’re viewed by your external stakeholders, such as your customers, future employees, investors, and regulators. 

Another CIPD survey − this time of just under 1,200 employers carried out around the same time in April 2020 − asked organisations which three concerns, if any, were most commonly reported by employees as a result of the coronavirus pandemic. The most common responses were: 

• Fear and anxiety about themselves or loved ones becoming ill (50%). 
• Negative impact of isolation and loneliness on their mental wellbeing (36%). 
• Financial worries causing stress (32%). 
• Fear of being made redundant (31%). 
• Poor work-life balance due to homeworking, such as difficulty balancing work and childcare (24%). 
• Increased stress due to new demands or challenges from homeworking (24%). 

While financial concerns are already an issue for around one third of employers (or two fifths of private sector employers), this proportion could rise as the situation gets worse. This is particularly true for those: returning to work from furlough who have been on less than full pay; who have had to cut their working hours due to caring responsibilities; and in households where a partner is receiving less pay or has been made redundant.   

What can be done? 

Employers have a role to play in improving employee financial wellbeing, but so do other parties, such as employees, the government and financial services. However, I’ll focus on what employers can do. In 2017, when we asked employees: what is important to your financial wellbeing? we found that paying them enough and paying them fairly was mentioned irrespective of age, gender, grade, etc.  

So, if nothing else, we should focus on these two issues. Paying a liveable wage, especially to key workers, will have cost implications. However, if we focus on improving employee productivity through job, work and organisational redesign then greater productivity can help pay for higher wages, plus paying people more money can also reduce recruitment costs through lower turnover. 

In theory, paying people fairly shouldn’t have cost implications. However, most employers are not starting fresh. Reward professionals will need to audit legacy reward decisions and outcomes, to check whether there are any problems that need fixing before they start talking both internally and externally about being a fair employer. When the organisation is ready to start talking we will need to persuade it to invest in communication skills, especially if line managers will have a role talking to employees about what’s on offer in terms of pay and benefits, and what people need to do to get that. 

Other important elements of a workplace financial well-being package involve such elements as helping staff to save for the future, manage their debts, offering them benefits that protect them against risk and helping them to become more financially literate. More information can be found at our website.  

However, there’s a challenge. The CIPD poll of employers finds that just 32% of them have a policy with a budget providing financial well-being support to staff, though another 11% plan to introduce one in the next three months.  

But there’s an opportunity: most aspects of employee financial well-being are already there. People professionals just need to check what is already being provided by their organisation, make sure what is being provided is fit for purpose, filling in anything that’s missing, and bring everything together into one offering. Then assess regularly the offering and amend as necessary. By adopting a strategic approach, we can help both our employees and employers better navigate the twin challenges of COVID-19 and an uncertain economy.