Helping employees cope with financial pressures

At a time when financial pressures are affecting businesses, what can they do to protect employees from knock-on effects? Dr Katherine Ashby reports.

Money is something everyone has to deal with directly or indirectly on a day-to-day basis – from buying food to paying for household bills and leisure activities. For some people, keeping their heads above water financially can be a constant battle and this may be especially true of people on low incomes.

New research published by the Joseph Rowntree Foundation indicates that it could be getting even harder for people on low incomes to meet a minimum standard of living. This echoes findings from The Work Foundation that during the recession, it is areas where people are already struggling financially that are hardest hit. However, it is important to clarify that this is not necessarily because of an inability to manage money effectively – on the contrary, people on low incomes are often accomplished at budgeting. Instead, a lack of money in the face of increasing living costs such as food and fuel is the problem.

Perhaps not surprisingly, research and policy debates in the UK have tended to focus on the financial distress (or lack of health) of those who are unemployed, but those in work can also suffer from significant financial hardship.

So why should employers consider how their employees are coping financially?

In the current economic climate, the number of employees experiencing financial hardship and anxieties related to their personal finances is likely to be high. Survey evidence from YouGov commissioned by AXA PPP suggests that employees at all levels are under personal financial stress at present. Further research by Aviva UK completed earlier this year also warns that some employees may be returning from work following periods of ill health too early because of financial concerns.

Financial burdens

Experiencing personal financial difficulties, including struggling to make ends meet and coping with debt, can negatively affect people’s lives in many ways, including their physical and mental health, work and family life. Being in debt (especially when it is at a level that is too high for the individual to maintain) has been linked with reduced mental health and wellbeing. Although debt can be both a cause and effect of mental health problems, evidence from the Office for National Statistics suggests that one in four adults with a mental health problem reports being seriously behind in paying a bill or making a repayment in the past 12 months, while among those without mental health problems this figure is one in 12.

The links between debt, financial distress and mental health are important for employers to consider. Mental health problems are one of the leading causes of sickness absence in the UK and a recent report by The Work Foundation, Bupa, RAND and the Oxford Health Alliance suggests that by 2030 mental health problems will be even more prevalent.

The Sainsbury Centre for Mental Health estimates that the annual cost of mental health problems to business is just over £1,000 per employee, or up to £26 billion across the UK economy.

However, all too often an employer’s awareness of mental health issues at work in the UK is minimal, with many senior managers greatly underestimating the scale of the problem and most thinking it will never affect their workplace. This is something the mental health charity, MIND, hopes to help tackle with its new workplace-based campaigns.

In addition to sickness absence, there is evidence that personal financial difficulties can negatively affect employees’ performance at work through loss of productivity owing to sickness presence – that is, employees going to work despite judging their health as such that they should have taken time off. Sickness presence is also referred to as presenteeism and according to estimates by the Sainsbury Centre for Mental Health, the cost of presenteeism could match or account for one-and-a-half times more working time lost than sickness absence.

A recent research study by The Work Foundation commissioned by AXA PPP, involving qualitative interviews and a survey of 510 employees, found that experiencing personal financial difficulties, including finding it difficult to make ends meet and coping with debt, was significantly associated with sickness presence.

Employees with financial difficulties reported a higher number of days of sickness presence, than those who were not experiencing financial anxieties. Moreover, high levels of sickness presence were related to lower levels of manager-assessed performance and reduced psychological wellbeing.

Given the links between higher levels of sickness presence, lower levels of performance and experiencing financial difficulties found in this report, a recommendation for employers was to consider the support they offered through the workplace vis-à-vis personal finances.

Workplace support and personal finances

There is a growing business case for employers to provide some form of support for employees experiencing financial difficulties, given the links highlighted above between financial anxieties and reduced psychological wellbeing and loss of productivity through sickness presence and sickness absence. There is also some evidence to suggest that enhancing the health and wellbeing of employees by offering support which they value, can help to increase employee engagement and retention.

Yet despite these findings, the ways in which employees can be supported (both inside and outside the workplace) to help improve their financial wellbeing and maximise their income is not well understood – it also does not seem to be on the agenda of enough employers, HR or OH professionals.

A report due to be published soon by The Work Foundation examines the type of support available for employees at work around their personal finances. The report was commissioned by the charity Elizabeth Finn Care, which includes Turn2us, a provider of free information on income maximisation through government and charitable benefits and grants.

Levels of employee support

The research found great variation in the extent to which employers provide personal finance advice or support to employees, especially to low-earning employees, who are more likely to be employed by small or medium businesses. The quality and comprehensiveness of support offered also varies greatly. Three of the main types of support offered by employers include:

  1. Employee assistance programmes (EAPs): These programmes differ in scope and comprehensiveness, but a number provide advice or counselling in relation to personal financial difficulties.
  2. Information on benevolent charities: There is evidence that some employers provide information on how to contact the relevant charities for their occupation or industry. However, the extent to which employers provide this information and employees’ awareness of these charities is unclear.
  3. Workplace financial education: Some employers provide this, although the length and scope of education programmes differ. The Financial Services Authority (FSA) also runs free workshops for employers. These usually focus on making the most of existing income through better money management and savings plans. Some include information on company pensions and investments.

Evaluations of these types of support are almost exclusively focused on workplace financial education. The evidence is not conclusive but it does indicate that workplace education can have positive outcomes for both employees and employers.

Further research is needed on the most beneficial delivery methods for support and employers. HR professionals need to talk to their employees about the methods of support they would find the most helpful and would be most likely to use – for example, do employees prefer internet-based material they can examine in their own time or would group sessions face-to-face be more valued?

As recommended in a recent report for AXA PPP on why people go to work when they are sick, it is important for employers and HR professionals to investigate whether or not those employees most at risk are aware of the types of health and wellbeing support offered and feel comfortable accessing it. This can be about feeling assured that any information they disclose, especially regarding their finances, remains confidential. It is also important to reassure them that they will not be viewed negatively for taking up support. Line managers need to be aware of support material, as they can be key in signposting information to employees.

Additionally, the report highlights that research is needed on awareness levels of both employers and employees of benevolent charities and how such charities can be signposted to employees through the workplace. As this kind of support is free, they offer a very valuable resource to small organisations that may be unable to afford other support, such as EAPs.

The Resolution Foundation highlights the challenges faced by low-waged employees – defined as households earning a total of between about £11k and £27k per annum before tax, who they describe as “squeezed, exposed and at risk of being overlooked”.

The Work Foundation, commissioned by Elizabeth Finn Care, is currently conducting qualitative interviews to investigate the experiences at work of low-earning employees and how managing personal financial difficulties impacts on psychological wellbeing and performance. As part of the research, the Work Foundation is seeking employees to interview who earn between £11k and £27k per annum before deductions as a household. The final report, due for publication later this year, will include recommendations and snapshots from experts including Dr Steve Boorman, author of the review into the health of NHS staff in 2009, on the role of the workplace in providing advice and information on money matters to employees.

External factors

Employees do not live in a vacuum and the experiences people have outside work can of course impact on their wellbeing, relationships and performance at work. Many top employers are playing an increasing role in recognising the impact work can have on the health of employees and many are considering how to enhance wellbeing through the workplace.

Anxiety about money and experiencing financial problems is a common theme in the UK at all levels – from government to individual households – so at a time when awareness of financial struggles is high, it seems crucial to better understand the most effective and relevant ways of providing support – both inside and outside the workplace – to those under financial stress.

Dr Katherine Ashby is a researcher at The Work Foundation and author of Why do employees come to work when ill?.

References

Donald Hirsch et al, A minimum income standard for the UK in 2010, 6 July 2010.

Helen Vaughan-Jones and Leela Barham, Healthy Work: Evidence into Action, The Work Foundation, C3 Collaborating For Health (working with The Oxford Health Alliance) and RAND, June 2010.

Katherine Ashby and Michelle Mahdon, Why do employees come to work when ill?.

Comments are closed.