Evidence that financial planning improves work performance

We need to talk about financial planning.

Employers are reluctant to discuss financial planning with their employees, and with good reason. The feeling that you’re opening a can of worms in terms of pay is an eternal worry. However, financial challenges that your employees face have a direct correlation with their performance when they’re at work.

Employees who receive financial education from their employers are altruistic.

In essence, employees are more productive when they feel secure financially. Subconsciously, employees do expect employers to take care of them financially. Employers who are not engaging their employees’ financial education are perceived as less caring. In contrast, employers argue, “I pay salary, income tax & NI calculated and opt-in pensions with 4% employer contribution. I already do all this for them, isn’t that enough?”

The answer seems to be no! Of particular concern to employers is the proven link between personal financial issues, poor productivity and absenteeism in the workplace. Studies by Barclays estimate that for every £1 million an organisation spends on payroll, it loses 4% of productivity due to poor employee financial well-being.

Five startling facts to consider:

• 40% of working-age people do not have good control of their money and do not manage it well, assessed as: keeping track of their spending, having a budget and sticking to it, and unable to meet current financial commitments without difficulty. Young people aged under 25 are much less likely to do this well.
• Only half of working-age people are paying into a pension or have a previous pension.
• 24% of the UK workforce cannot read payslips or bank statements correctly.
• Among those who already have a heavy debt burden (measured as missing three key debt repayment deadlines in the last six months), 81% have sought no advice and 33% cannot imagine doing so.
• This reflects social attitudes which are focused on living for today, with only around 40% thinking it is important to save for a rainy day or for retirement.

Education is the key to improving employees’ finances.

If you asked your employees how to improve their finances, the apparent reply is “to pay higher salaries”. It’s worth bearing in mind that poor money management cuts across the class divide. While the lower-paid workers typically have more deficient finances, this is more often due to proportionally higher living costs. The startling statistic is that as many as 28% of employees have a buffer equal to 3 months of salary saved. How many of your better-paid staff could honestly say that they have three months of salary saved?

So if the salary isn’t the first metric to look at when looking at financial pressures, what are? The age demographic of your employee. In general, each age group has a set of financial touchpoints which will be irrelevant to other age groups.

Next week we look at the various challenges each age group faces with their financial planning.

Before you go

Employees that use the My Staff Shop platform have constantly reinforced messages about saving money on everyday purchases. There is lots of free, targeted information regarding personal investing and using platform savings into longer-term investments. We enable your employees to improve their short, mid and long term financial health. In addition, there is also a free 15-minute consultation with a qualified IFA for those looking for more in-depth advice.

For a free demonstration and to answer your questions please get in touch!