Enhancing employee financial wellbeing: why it matters to your organisation
While organisations may be aware of the need to support staff with their physical and mental wellbeing at work, few give much thought to their financial health, writes Marianne Curphey. Yet many employees are feeling greater levels of financial stress due to rising costs. There is growing evidence money worries can dominate people’s lives and affect performance at work.
13 February 2025
This article is taken from the Leadership Supplement from
Relocate Think Global People
Click on the cover to access the digital edition.“The right behavioural interventions can empower employees to make more sustainable financial decisions, enhancing their wellbeing and, in turn, lift productivity and engagement.”
Emily Trant, chief impact officer at Wagestream, a workplace financial wellbeing app, said that worrying about bills, having to handle unexpected expenses and fearing the next rise in housing or fuel costs can affect the cognitive performance of colleagues and their ability to work at their best.Speaking at the CIPD conference and participating in the discussion on ‘How behavioural science can level up your FinWell strategy’, she described how studies show that chronic financial stress can diminish cognitive function by up to 13 IQ points.“Financial and mental health issues are affecting a significant proportion of the workforce and it affects their wellbeing and performance,” she said. “Employees not only need this support, but they expect it.”
What is financial wellbeing and why do we care about it at work?
One issue around financial wellbeing is that it is difficult to measure. Emily Trant used the definition from the Money and Pensions Service (MAPS), an organisation sponsored by the Department for Work and Pensions in the UK.It defines financial wellbeing as: “Feeling secure and in control, being able to make the most of your money day to day, being able to manage something unexpected and be on track for a healthy financial future.”“Feeling secure is subjective among people even with the same bank balance,” she explained. “Making the most of your money day to day is about finding joy in life, finding pleasure, having your money work for you that allows you a quality of life that feels good to you. Managing something unexpected, whether that is an income shock or an expense shock, is about having the resilience to cope with it and having it not blow you off course. There is a trade-off between then and now to ensure that you are in a really good place today, but making sure you are in a good place tomorrow.”Acknowledging that financial wellbeing is subjective and differs from person to person, she said that as well as “being altruistic and caring about our people”, employers should act because the cost of presenteeism – of people not fully engaging at work – is estimated at £24 billion in the UK.“That might be because of physical health, financial health or mental health and it equates to 2 hours 36 minutes of productive time per person per day when they are not fully showing up,” she said.“In addition, when you are suffering from financial stress and carrying the cognitive load of worrying about money, constantly thinking and worrying about your finances, that costs you 13 IQ points. That is not an insignificant figure. It is the difference between average intelligence and superior intelligence.“Financial stress is when you're carrying that load, thinking about money, worrying about money. Can I pay that bill? Should I pay it late? Have the kids grown out of their school shoes already and what's going to happen at Christmas time? What if fuel prices go up even further? Thirteen IQ points is the cost of that constant thinking and learning and managing and juggling. That is the effect of carrying financial stress.”She said that the unconscious effort of constantly thinking and juggling also affects your executive function and your impulse control, so you make worse decisions.“You're more likely to shout at a family member or a friend or a colleague and make worse money choices,” she said. “You do things that are not productive for your overall financial wellbeing. You make mistakes when it comes to patient care. You make mistakes at the till. It really affects your whole life. Imagine if you could lift the productivity of your workforce by two hours and 36 minutes a day and if you could lift their IQ by 13 IQ points.”The empathy gap between senior leaders and employees
Wagestream’s report, The State of Financial Wellbeing 2024: How leaders shape FinWell in the workplace, explores how financial wellbeing is experienced and understood in the context of the workplace. The 2024 report, produced with behavioural science consultancy CogCo and written by Emily Trant and Owain Service, CEO of CogCo, explores the dynamic between senior leaders who govern financial wellbeing in the workplace and their working populations.The survey found an “empathy gap” between high earners and low earners:- Higher earners underestimate the financial savviness of lower earners: Higher earners substantially underestimated how well lower earners are managing their money. While they make good predictions in a couple of basic areas – grocery spending and money left at the end of the month – they are wildly out of tune with how this translates into financial resilience and social outcomes.
- Higher earners predict that three times more lower earners are missing out on social activities, that they save a third as much as they really do, that they would survive less than half as long if they lost their main salary and that they worry about money twice as much as in reality.
- This empathy gap is particularly important because every single business decision-making role is in an income bracket that is higher than the UK median (£34,963). A minority of higher earners make all the decisions that affect the majority of the workforce and yet they struggle to understand their true circumstances.
- The gap is particularly stark when we look at savings: Lower earners have a median savings balance of £3,000, but for higher earners it is £25,000. With four times more money left at the end of the month, higher earners accumulate more than eight times the savings of lower earners.
- Higher earners have more resilience should the unexpected happen: Lower earners report being able to get by for a median of 75 days if they lost their job; for higher earners this was 180 days. Despite higher spending, higher earners still have more resilience when it comes to meeting their core costs.
- From an employer perspective understanding this gap is crucial to avoid misplacing support efforts: More lower earners have no money left each month, no savings, more frequent money worries, low financial resilience and more frequent limitations on their ability to participate in social and recreational activities. People leaders often place a heavy focus on financial education, rather than a focus on financial inclusion.
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Using behavioural science to level up your financial wellbeing strategy
Financial stress doesn’t just make employees anxious. It can also affect their ability to think clearly and make rational choices, influencing life at work and home. One way to address this imbalance is to help employees make good financial decisions by harnessing the power of behavioural science.Owain Service, CEO of CogCo and Honorary Professor of Behavioural Science at Warwick University, was co-author of the financial wellbeing report. He was previously the co-founder and managing director of the UK Government’s Behavioural Insights Team and before that deputy director of the Prime Minister’s Strategy Unit.He told the CIPD that by understanding behavioural science principles – such as “nudging” people toward better choices – employers can create financial wellbeing programmes that are intuitive and effective. The right behavioural interventions can empower employees to make more sustainable financial decisions, enhancing their wellbeing and, in turn, lift productivity and engagement.He explained that behavioural science explores how people make decisions and why they often choose immediate rewards over long-term benefits – a tendency known as “present bias”. This can be seen, for instance, when people say they will go to the gym tomorrow instead of today and then keep deferring it. This bias is not limited to fitness goals. It also impacts financial decisions, like saving money. Financial wellness programmes can harness the power of behavioural science to simplify the process of making financially healthy decisions, so employees can be nudged towards positive financial decisions.Employers can guide people towards beneficial choices without requiring drastic mindset changes. For example, employers can help their staff build up savings by making it an automatic part of payroll and giving employees the option to opt out rather than requiring them to opt in. This small difference can lead to greater engagement with savings programmes and has already been shown to work very effectively in the auto-enrolment into workplace pension schemes, a rule established in the UK under the Pensions Act of 2008, which has led to £114 billion worth of pensions savings over ten years.Another fascinating insight from behavioural science is that people treat money differently based on how they acquired it. For example, people are more willing to spend money that they win as a lottery windfall than they are from a legacy or money they have inherited. This suggests people attribute different meanings to money depending on its source and that this can affect their spending and saving decisions.“When we experience windfalls, we tend to deal with that pound in a completely different way from a pound that we receive from our salary,” Owain explained. “The least-spent pot of money is from something like an inheritance because we treat it very, very differently.”Bupa – the positive impact of automatic savings enrolment
One recommendation in the ‘State of Financial Wellbeing’ report is to implement payroll savings programmes and ideally structure it on an opt-out basis so that employees build up savings by default.This is an approach Bupa, the healthcare company, decided to trial. Rather than requiring employees to opt into a savings plan, Bupa reversed the default by automatically enrolling new employees in it, giving them the option to opt out if they wished. This led to impressive results: over 70% of employees retained their savings accounts and made regular contributions.Behavioural science reveals that when employees don’t have to actively transfer money from their main account to a savings account then they are more likely to save consistently. As Owain pointed out, when you make the desired action easy, people are far more likely to follow through.Rebecca Pearson, general manager, care services, Bupa Global, India & UK, was instrumental in introducing a savings scheme for new employees, but said that initially she had been concerned that the policy might seem “paternalistic”. In fact, by listening carefully to employees, Bupa enabled employees to build up a savings pot and over time to increase their financial resilience. This meant that employees could achieve ambitions like buying and running a car for the first time or having an emergency financial fund for unexpected expenses.“We listened to feedback from our employees and came up with this concept to help them,” she told the CIPD panel. “When new employees joined the organisation, they could enrol with Wagestream, which is one of Bupa’s most popular employee support benefits. We would automatically enrol them into the savings products and they had to physically opt out of that.“When we were taking that step, we wondered if that felt a little bit bold because people hadn’t asked for that, but we felt confident about the feedback we had received. We speculated that a good number of people would choose to opt out, but actually, that's not what happened. We have seen more than 70% of the employees keep the savings plan and they make regular savings. There are some lovely stories about things our employees have achieved that wouldn't have been possible without that change in behaviour.”In other words, financial wellbeing is no longer just about offering a workplace pension scheme, although that is an important aspect of employee benefits. It is also about using behaviour science strategies to help people make meaningful and sustainable changes.“We were making a call on where people’s cash went,” Rebecca explained. “We had very strong feedback that people wanted help to build resilience and to feel the psychological benefits of having resilience. In the end, the worries that we had didn't materialise.”Bupa also discovered that employees wanted health benefits that addressed specific needs (such as mental health services or access to timely GP appointments) rather than a traditional comprehensive health insurance plan.“We have developed a package of healthcare benefits that specifically focuses on the areas where employees want help,” she said. “That is unique to us and it wouldn't have happened without active listening. It helps our employees because it allows them to get treatment quickly and not be absent from work that could result in statutory sick pay, for example.”How to create a financial wellbeing kit at work
Owain Service and Emily Trant say that it is important to ensure that any financial wellbeing package you introduce is tailored to the needs of your workforce and considers their circumstances, including volatility of earnings.“Financial education can be helpful, but unless it’s paired with actionable and accessible financial security tools it’s likely it will fall short of the mark,” they say in the report.When considering a financial wellbeing offering, ask the following questions:- How does this create financial inclusion for women and individuals from ethnic minority backgrounds?
- How does this work for individuals on variable pay?
- What access to financial products do individuals need to successfully use this?
- What proportion of the workforce will be able to use this?
- Are there any particular groups who are more or less likely to benefit from this?
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