Our financial security can impact on our wellbeing.
Financial security - being and feeling able to make ends meet - is one of the key aspects of a good job and a driver to workplace wellbeing.
Which employees are more at risk?
While over half of UK households in poverty have at least one person in the household in employment, those more likely to experience financial vulnerability are:
Impact beyond income
Twenty-seven percent of employees in the UK do not have sufficient assets to cover a drop in income of 25% for three months. This increases to 40% for the lowest paid workers.
Financial concerns clearly go much further than just how much we are paid. Debt, the ability to save, unforeseen expenditures, and control of financial circumstances more generally all have an impact.
It is important to consider how secure we feel our jobs are, and how this might affect our future expectations for work and retirement.
A study conducted by the ONS shows that while income is related to a sense of financial security, household expenditure matters more for wellbeing: increase in spending ability is related to rises in happiness, life satisfaction, and in the sense that what one does in life is worthwhile.
Two thirds (67%) of employees who are finding things financially difficult report at least one sign of poor mental health, compared to 41% of those who are financially comfortable.
Unmanageable debts in particular can have serious implications for mental health.
COVID-19 and financial insecurity
The latest data from ONS finds that 24% of adults in the UK said that their household finances are being affected by COVID-19. Three quarters of those people said that it was due to reduced income, with 11% of those people now struggling to pay bills.
People who have been impacted financially also report lower wellbeing; with 16% higher anxiety on average. Those who think they will not be able to save money in the next year reported anxiety 33% higher, on average, compared with those who think they will.
The effect on finances is hitting younger people harder, with polling showing that a quarter of young people say they have already needed to use up their savings, compared with 13% of 35-54s and 11% of 55-75-year olds.
However, as Sarah Poretta of the Money and Pensions Service finds in their forthcoming report “Pension values have been hit and this is most likely to affect those who have already retired or are approaching retirement and have a defined contribution pension who might have to make some difficult decisions.”
The ongoing uncertainty around the coronavirus and the impacts on the economy mean that financial concerns are both immediate and long-term, with employees unable to make plans for the future, even if their income has not been affected directly in the last few months. People’s wellbeing will continue to be affected by worries about their level of income, how secure it is, how manageable their debts and bills are and their prospects for saving and investing for the future, particularly for the millions of people that have been covered by the furlough scheme, which is expected to end in the next few months.
What can you do…
Get in touch to find out how wellbeing can be made a part of your recovery plan.
Ask employees how they are doing. Part of this means creating an open environment in which to discuss money concerns without stigma. Even where there have been no changes to an employee’s income, other changes to household income and expenditure or their pension value may be creating money worries for a person.
Explore options for supporting employees to smooth financial shocks, including those associated with COVID-19. This could help to avoid defaults and long-term effects on people’s credit ratings. Although this looks different in different organisations, it might include, for example, employers offering short-term loans or savings schemes that complement a range of government provisions to freeze debt repayments.
- Sign-post employees to appropriate advice and support, such as that offered by The Money Advice Service which has written a series of guides to help people navigate their finances during the pandemic.