The inflation-fuelled cost of living squeeze means a far greater focus on financial wellbeing will be needed to support employees and help employers retain talent and maintain productivity. To download a PDF of the round table supplement, CLICK HERE.
Speaking at a Corporate Adviser briefing event last month Charles Cotton, senior adviser, performance and reward at the Chartered Institute of Personnel and Development (CIPD) said that the coming years would see financial wellbeing play an increasingly important role in supporting corporate culture, as employees and employers grapple with rising costs and a post-Covid environment that had seen significant disruption to working practices.
The pandemic, he said, has highlighted the challenges of recruiting and retaining talent — a problem which had been exacerbated by labour shortages in particular industries. This, he told delegates, has led to many organisations re-evaluating how they reward staff, be it via salary, benefit packages or through the working environment and culture.
Cotton said the concepts of ‘corporate culture’ and ‘wellbeing’ had evolved, and argued neither were easy to define.
“At the CIPD we prefer to talk about corporate climate. This can be a bit more precise, when talking to employees in terms of reward and training, and inclusion and diversity.”
The concept of wellbeing has also evolved he says: “Initially it was about a health and safety in the workplace. Over time we’ve seen a shift towards a more proactive approach, which seeks to prevent people from falling ill in this first place.
“Alongside this we’ve seen the primary focus shift from physical health to encompass mental health as well. Ten or 15 years ago people were very reluctant to talk about their mental health, particularly in the workplace. But there’s been a concerted push by organisations to try and create a more open environment where people can talk about their mental health more openly.”
When it comes to the financial element of ‘reward’, Cotton said many organisations are taking a ‘targeted’ approach. “They are looking at who the essential people are
in any organisations, who they can’t afford to lose and looking at what they can do
But he said the tendency to focus solely on the financial aspects of reward may be short-sighted. He cited the examples of attempts to increase recruitment of lorry drivers in the logistics industry, where simply giving more pay isn’t the answer. Many have called for better working conditions, longer breaks, “a sense of dignity” as he describes it, alongside a more generous hourly rate.
Taking a more holistic approach to the concept of reward can help with recruitment and retention of talent across the workplace, and benefits have a clear role to play in this, he said.
A range of employee benefits can support wellbeing in the workplace, including financial wellbeing. As well as financial education programmes, access to EAPs, virtual GPs and other added value-benefits can ensure employees can access appropriate help when they need it.
Cotton also shared research on how benefits packages offered by employers had changed since the pandemic.
“In terms of benefit spend there was little change during 2020. However 35 per cent of the organisations we spoke to
had changed their benefits. As you would expect things like Christmas parties disappeared, and organisations amended annual leave policies for example, as many people weren’t using them so there was flexibility to carry them forward,”
During this period Cotton said there was more emphasis on communicating employee benefits, particularly add-on ancillary benefits, such as EAPs and virtual GPs.
Looking forward to 2021, there was more of a focus on protecting employees’ physical wellbeing, with exercise programmes. There has been more embedding of flexible working practices, as well as the introduction of paid bereavement leave. “Organisations have often gone further than the legal requirement on these issues,” he said.
Looking ahead, research with employers suggests that many are looking to spend more on benefits. But Cotton said: “The number of new benefits is small. It is basically organisations spending more on what they have already got, rather than bringing in new benefits.
“When we talk to organisations a lot of this new spend is around coaching and mentoring programmes, apprenticeships and cycle- to-work schemes.”
Delegates debated the role benefit consultants had in helping employers ensure benefits met staff needs, as well as delivering on employer objectives.
Keith Bale, head of distribution at YuLife pointed out that future benefit spend doesn’t seem to address some of
the critical wellness issues that the industry is seeing coming out of Covid. He said that many organisations may need more help from consultants and insurers when it comes to addressing these issues.
Cotton agreed, and said part of the problem is that employers have been “quite tactical” but may need to think more strategically to address the issue of employee wellness and how this supports their own business.
Critical to this is to have some means of measuring the wellbeing of staff, including financial wellbeing. “It’s important to create a baseline, to understand how employees feel about their financial situation, and then go back and look at this at a later date. Has this improved? How has an organisation shifted the dial on this?
“It’s an opportunity to help employers think about how they are managing
pay within their organisations and employee benefits alongside broader issues of reward.”
Many of those attending the debate pointed out that changing hybrid working conditions has made it more difficult to evaluate employee wellbeing. Verlingue UK head of employee benefits Mark Pugh said that while some staff may be keen to return to the office, others like the flexibility that homeworking offers.
These hybrid arrangements offer challenges for employers, when it comes to benefits programmes, both in terms of communication and ensuring these benefits meet the needs of a diverse workforce. He pointed out that different sized business, across different industries will have very different needs and there is no “one-size fits all” approach.
Zoe Ashley, healthcare consultant at Buck pointed out that the ability to work from home has helped many employees with children or older relatives to care for. This flexibility can create loyalty, helping with staff retention. But she also stressed that it is important for employers to audit benefits, to find which are most valued. “It is about recognising what staff want and need, and supporting them.”
Cotton points out that while there has been a surge in home-working as a result of the pandemic, other flexible working arrangements – for example part-time work, job shares, compressed hours or flexi-time have all become less widely used over this period.
Ian White, managing director of Beckett Investment said he felt more SMEs are now waking up to the importance of employee benefits and the vital role they play in recruitment and retention of key staff.
He said: “If in a pandemic you can’t decide if employee benefits are a good thing then I am not sure when the penny will drop.” He said many understood this before the pandemic, but this has brought home the importance of a healthy workforce, physically and mentally. For small businesses staff remain their most crucial asset, he pointed out. “The SME market is falling into two camps, those that get this, and those that are falling behind on this issue. Those that are falling behind are doing so at quite a rate.”
Mathew Rann, strategic employee benefits consultant for Wingate Benefits Solutions says engagement is a two-way process. Benefits need to be properly communicated to employees, but employers also have to engage with their staff to understand their needs better. Consultants can help with this process.
He added: “The most important thing for employers is to engage with their staff and find out exactly what they want, rather than forcing them into a solution that is best for the business, not the employees.
“Business may be pleasantly surprised that more people than they thought want to spend time in the office. There isn’t a one-stop shop when it comes to benefits and wellbeing that says this is right for everyone.
“The key thing for businesses large and small is that benefit packages should be proactive, helping to make staff more resilient: emotionally, physically and financially.”
Financial wellbeing and physical and mental health
Chartered Institute of Personnel and Development (CIPD) senior adviser, performance and reward Charles Cotton believes there is a need for more detailed research into this area, but added that the work undertaken to date, by the CIPD and others, shows a real correlation between money problems and an individual’s stress levels, mental health and wellbeing.
“It is still early days in terms of researching financial wellbeing, but more organisations are becoming aware of this issue. Back in 2016 the CIPD surveyed employees and asked whether financial worries had negatively impacted their work. We found one in four of them said this was an issue, most commonly resulting in lack of sleep. This led to fatigue, a lack of focus and in some cases taking time off work.
“For organisations there is the implication that higher levels of financial stress among the workforce can lead to lower levels of employee productivity, innovation, creativity, and poorer customer service — as well as higher levels of absence or workplace accidents.”
He said employers were already looking at financial wellbeing before Covid, but the pandemic has put additional financial strains on many employees and their families.
The challenge, according to Cotton, is that these could be intensified significantly by the cost of living squeeze, which looks set to worsen significantly this year — with inflation forecast to rise to over 7 per cent, thanks to spiralling food and fuel bills and further tax and national insurance rises on the way.
Cotton said the extent of this problem can clearly be seen in research that tracks people’s financial wellbeing. In Autumn 2020, six months after the start of the pandemic, a CIPD survey of employees found that just under half (49 per cent) said their financial security had changed during the pandemic. Around 35 per cent said their financial situation had worsened, although 14 per cent there had been some improvement, as a result of a no commuting costs and savings on eating out, holidays and other expenditures.
A similar survey conducted by LCP in January 2021 found a third of employees now said money worried were impacting their ability to do their job.
The pandemic may have receded, and wages are starting to rise, particularly in sectors hit by labour shortages. But this, he says has to be factored against the cost of living squeeze — which has the potential to affect an even greater swathe of the workforce than Covid.
Organisations need to address this issue, and should not be complacent that a workforce of higher-paid workers is immune from these financial stresses he warned.
Cotton was sceptical about the success of financial education in improving financial wellbeing. He said: “The research undertaken has found that actually financial education doesn’t always help a great deal. This is not necessarily with the financial education itself, but how it was being delivered.”
Targeted education programmes, broken down to topics and potentially linked to employees’ career or life cycle may prove more successful. He added: “Debt counselling has also been shown to be quite useful. One challenge though is the fact that those who would most benefit often don’t see the relevance for themselves.
“It is about developing the appropriate workplace culture, with an emphasis on transparency and being open, so people can be encouraged to access these kinds of services and help without feeling shame or stigma.”
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