More than three-quarters (77%) of employees have experienced financial stress over the past year and 45% have lost sleep due to financial anxiety. It’s a pervasive issue and the harsh reality is that few employees are immune. The impact is also far-reaching: financial distress creates a domino effect that impedes physical and mental health, leading to reduced productivity and performance. Financial empowerment is a business-critical issue that must be prioritised not just at an HR level, but at the top table too.
So what’s being done to help? In the UK, more than 14,000 employers have voluntarily signed up to pay the Real Living Wage (a higher minimum wage threshold based on the cost of living). Employers are also offering more company and salary sacrifice benefits as standard, including private healthcare, childcare vouchers, and retail discounts.
These are valuable initiatives that help to reduce financial stress yet they’re all employer-led and in today’s tough economic climate, one-way financial wellbeing is no longer enough. Instead, employers should be looking to financially empower their people. This means not only lending tangible benefits and support but enabling employees to access the education and tools they need to better understand, track, and manage their finances. Now and into the future.
What we’re talking about here is complementing top-down financial wellbeing with bottom-up financial empowerment; a combined strategy that puts more power in people’s hands and which enables employees to take an active role in engineering their own financial health.
Payroll: the foundation of financial wellbeing
Sitting right at the heart of this matter is payroll – and more specifically, payroll experiences that are underpinned by accurate and on-time pay, as well as self-service access, helpful explainers, and financial guidance. This is how employers can build good financial behaviours and protect employee wellbeing in the process.
Here are three ways to support financial empowerment in your organisation:
- Financial education
As many as three-quarters (73%) of people living in the UK fall below the financial literacy benchmark. We all learned our times tables in school yet financial literacy, for whatever reason, didn’t feature in the same way. Even with this in mind, it’s still staggering to think that 8 out of 10 employees do not feel confident in their ability to understand every element of their payslip or spot a payroll error.
Education is key because it’s empowering and because it presents a prime opportunity to support financial wellbeing. By offering access to financial planning and guidance through company benefits, and by connecting employees with helpful resources such as Moneyhelper (the UK government-backed website that provides free and impartial financial support), employees can build the critical knowledge they need to budget effectively, save for a rainy day, and plan for the future.
- Interactive payroll
There’s a reason why traditional payslips can be difficult to understand. They’re typically riddled with acronyms and financial speak, and they’re also increasingly misaligned with the needs and wants of today’s workforce: 39% of employees want access to financial wellbeing support as part of their digital payslip, for example, and this rises to 43% among younger workers.
This is where interactive payslips, powered by AI, will play a revolutionary role. By empowering employees to access an explanation for key elements of their payslip, as well as any changes (think net vs gross pay, National Insurance, tax codes, student loan repayments, and pension contributions), AI-assisted payroll will enable employees to track their pay at the touch of a button and access on-demand support from a virtual payroll assistant. This will never replace the expertise of a trained payroll professional, of course, but for standard, easy-to-resolve queries, it can provide a valuable first port of call.
- Flexible pay
Financial literacy and interactive payroll present a powerful combination, but there’s also a third piece to this puzzle: flexible pay that enables employees to draw down a percentage of their earned income before payday. Also known as earned wage access, flexible pay empowers people with a critical safety net and a third of UK and Irish employees believe it’s a key component for financial empowerment.
There’s still a lot of myth-busting to be done, however. Unlike a loan that must be repaid, earned wage access simply allows people to access their pay sooner for work they’ve already done. Most importantly, it creates choice and provides both a practical and psychological safety net.
Another misconception is that flexible pay is geared towards younger employees on low pay. Uptake of earned wage access is actually consistent across all levels of seniority, which means that any and every employee, no matter how much they earn, stands to benefit from it at some point in their working lives.
There are tangible advantages for employers here too: offering flexible pay along with other financial wellbeing services can help organisations to fill shifts, perhaps because employees are more inclined to work overtime when they know they can be paid more quickly.
The importance of integration
These are not standalone strategies, of course, and the real potential lies in integrating employer and employee-led benefits to provide a holistic financial wellbeing offering that educates and encourages good financial behaviours, and which, crucially, paves the way to financial empowerment.
David Roberts
David Roberts is Principal Product Manager, Fintech, at Zellis - the largest provider of HR and payroll software to the UK and Ireland. David leads product strategy and development within Zellis' Fintech domain and thrives on finding solutions to address user needs. David's expertise stems from leading product, innovation, and marketing areas at diverse organisations including Admiral, RAC, and Warburtons.
