3 ways to address financial exclusion and improve your employees’ mental health

A frustrated-looking woman leans on her hand as she holds a bill in an envelope, which has a red stamp reading: PAST DUE.

Money worries get to most of us at least some of the time. But for some of our colleagues, money worries are almost all they think about.

Not only does this have a direct impact on their ability to thrive at work, it can also have serious mental health consequences which often trigger even worse financial issues.

In this article we explore some of the causes of these money worries, why they matter to employers, and what employers can do to address them.

What is financial exclusion?

If someone finds it difficult or impossible to access mainstream financial services such as bank accounts, savings or reasonably-priced loans, they are considered to be financially excluded.

To what extent are UK employees financially excluded? To answer this, let’s consider some recent trends in personal finance:

  • Income: the average UK income has dropped 10% in the last 10 years;
  • Wealth: millennials have 50% less wealth than those born ten years earlier had at the same age;
  • Savings: almost 17 million working-age people in the UK have less than £100 in savings; and
  • Debt: at a national average of £3,600, personal debt in the UK has grown by 50% in the last three years.

In other words, the squeeze on pay and the ever-rising cost of living means that debt is an inevitable part of working life in 21st century Britain.

And, based on our extensive research, we also know that over two-thirds of our market pay interest rates of over 20% on their personal debt, and a staggering one in four pays over 100% APR.

This all paints a stark portrait of life for millions of people in the UK – a life characterised by extreme financial fragility, in which debt is an inevitability and financial exclusion is the norm.

 

Does this matter for employers?

It matters for two reasons.

First, it gives employers an opportunity to bolster their reward strategy goals by addressing issues that have been underserved to date.

With sensible recruitment, retention and motivational goals in mind, employers have traditionally focused on the asset side of individuals’ personal balance sheets through products like pensions, share schemes, and corporate ISAs.

But in this new world where debt is a certainty, the ability of HR and reward professionals to achieve these goals is impaired if they neglect the emotionally and financially draining impact that high-cost personal debt has on millions of employees across the UK. Thankfully, solutions now exist to assist employers in addressing these challenges.

Second, it highlights the need for employers to proactively engage with their employees’ mental health.

In an excellent piece of research, the Money and Mental Health Policy Institute have identified the powerful connection between financial and mental health: many people experience a downward spiral in which poor financial health triggers poor mental health, and vice versa.

Further research has highlighted that people with debt worries are twice as likely to develop major depression as those without. So by failing to provide debt solutions to their employees, employers run a very real risk of serious mental health issues arising among their teams.

 

What can employers do to address this?

We encourage employers to consider three themes to address the interconnected problems of poor financial and mental health:

1) Exclusion to inclusion

To tackle financial exclusion, we recommend that employers first seek to truly understand the needs of their employees, and then design reward packages and wellbeing strategies to deliver impact to those who need help the most.

To build mental health across an organisation, we recommend a 3-tier strategic approach:

  • Tackle the stigma: Otherwise, employees won’t use the resources.
  • Raise awareness: Educate managers and employees to ensure they can spot the early warning signs of poor mental health.
  • Empower responses: Ensure that all managers and employees know what to do when someone is unwell, including directing their colleagues to the practical and emotional resources that will help them recover and stay well.

2) Complexity to simplicity

It is proven that the more strain people are under, the less able they are to absorb complex information. We therefore encourage employers to deploy simple products that employees and managers can easily understand even in times of high stress.

Some of the best results come from the simplest of interventions – for instance, recent research from the Money Advice Service highlights the transformative impact that spending or savings targets can have on people’s financial and mental wellbeing.

3) Fragility to resourcefulness

If employers focus on points 1 and 2 above, they should reduce financial and mental fragility and enhance employees’ resourcefulness.(NB: resourcefulness not resilience – we believe discussing resourcefulness encourages people to use better tools and techniques, whereas discussing resilience can imply a need to “toughen up”.)

In addition, we encourage employers to adapt the familiar 5-a-day fruit and veg campaign to the world of mental health:

5-a-day for mental wellbeing

  1. Connect with others on a regular basis
  2. Stay active
  3. Keep learning
  4. Give your time and support to others
  5. Take notice of things around you and appreciate them.

In conclusion, we recommend that employers consider financial wellbeing solutions any time they are considering mental wellbeing, and vice versa. These issues are very closely linked and can be effectively addressed in tandem.

SalaryFinance and and Open Minds Health are hosting a webinar, ‘The 3 steps to improving mental and financial wellbeing in your workplace’ on Tuesday 6th December. Click here to register for the webinar.

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