Businesses must empower their staff to plan for their financial future: here’s how

By Chieu Cao, CEO of Mintago

Without a doubt, the challenging economic circumstances that we have witnessed in the last couple of years have severely impacted the financial stability of many employees in the UK, both in the immediate and distant future.

Growing inflation, eye-watering energy costs, and rising interest rates have all contributed to an enduring struggle for many Britons. In order to meet the basic cost-of-living, some working people have had to live from one paycheque to another and focus on their short-term financial obligations. Unfortunately, this often damages employees’ aspirations for greater long-term financial security.

It is imperative, therefore, that employers, HR managers, and decision-makers within a business work to proactively facilitate and empower employees to continue to work towards their long-term financial goals – even in the face of short-term financial difficulties.

As such, employers must effectively enable their workforce to seize control of their financial wellbeing in the long run, and – especially during the cost-of-living crisis – it must be made a priority.

The importance of long-term planning

Across an employee’s life and career, it is inevitable that they will encounter significant financial goals that demand thoughtful and attentive planning.This can include homeownership, starting a family, building wealth, and ensuring a comfortable retirement. Many of these goals are difficult to fulfil, especially if employees are not given the tools needed to organise their finances beyond the day-to-day management of immediate financial obligations.

If we take the goal of a comfortable retirement as an example, employee pension schemes are a particularly important factor of an individual’s long-term financial wellbeing that are being overlooked in the current climate. Indeed, recent research shows that a fifth of employees in the UK have stopped or reduced their pension contributions in the last year. Yet, to maximise the value of their pensions, employees need ample time for growth. As such, by reducing their pension contributions, employees could be missing out on the chance to boost their pension’s worth and secure future financial wellbeing.

Moreover, the ability to plan for the future becomes particularly crucial when unexpected

circumstances – like the cost-of-living crisis – arise. Employers must ensure that their employees are able to tackle monetary emergencies without resorting to debt or facing other financial difficulties. Ultimately, this relies on their being in control of their future financial wellbeing. Businesses that are failing to foster a workplace that places value on a solid long-term financial strategy are putting their workforce’s entire future financial wellbeing at stake.

Unfortunately, such a lack of support is extremely prevalent amongst UK businesses, despite the media and public attention that the difficulties of the last year have attracted. Indeed, according to Mintago’s recent research, just 38% of workers have access to employer-provided support for managing their long-term finances.

The impact of failing to empower employees to manage their long-term finances

While some employers may perceive employee finances as being outside of their remit, it is crucial to acknowledge that this impact of a lack of long-term financial planning extends beyond the lives of individuals. Underestimating the ramifications for businesses would be a mistake, as the adverse effects of employees’ financial struggles can profoundly harm a business’ productivity levels and job satisfaction.

In a recent study conducted by Mintago, for example, half of the employees surveyed (49%)

reported that stress and anxiety stemming from financial worries had a detrimental impact on their overall job performance. The survey also revealed that the rising cost-of-living and money worries were the two leading causes of stress amongst employees. It is clear that businesses could see their team’s job performance falter if they do not step up and provide the right kind of support.

Related to this, the implications of poor long-term financial wellbeing extend to staff retention, as a lack of support could be interpreted as a lack of concern for employee welfare. Alarmingly, less than a third (32%) of workers currently feel that their employer genuinely cares about their financial wellbeing, which is perhaps why 44% expressed their willingness to leave their current role in search of better employer-provided financial wellbeing support. Obviously, employees value employers who show willingness to help them reach their long-term financial goals.

It is worth noting that The Society for Human Resource Management (SHRM) estimates that the cost of replacing an employee ranges from six to nine months of their salary. So, considering the average salary in the UK is around £30,000, the average staff turnover cost is estimated between £15,000 and £22,500 per employee, which could be incredibly detrimental to a business in the current climate. As such, there is not only a moral case for supporting employees, but also a business case for investing in financial wellbeing as a strategic approach to enhance staff satisfaction and retention.

How employers can better support their employees’ long-term financial planning

One of the most effective approaches to assist employees in planning for their financial future is by offering comprehensive financial education and training. Many employees lack the necessary financial literacy to make informed decisions regarding their finances, particularly when it comes to the complexities of long-term financial planning.

As such, even something as simple as providing access to educational resources can help employees acquire essential skills such as budgeting, saving, investing, retirement planning, and debt management. These resources enable employees to make better-informed monetary decisions, providing them with the support they need to effectively manage their long-term finances.

Additionally, facilitating access to independent financial advisors (IFAs) can be instrumental in helping employees develop a personalised strategy to grow their savings, despite the challenges posed by the current economic landscape. IFAs offer tailored, unbiased advice that aligns with employees’ specific long-term financial goals, whether they are saving for a property or want to ensure they have a dream retirement.

Moreover, the implementation of a comprehensive pension dashboard proves invaluable in enabling workers to effectively plan for their long-term retirement goals. Such platforms streamline and optimise pension management, while also providing the added benefit of helping employees trace any lost pension pots from previous employers. Indeed, this can deliver a healthy boost to an individual’s financial outlook.

Final thoughts

While the economic situation is beginning to look more positive, businesses cannot become

complacent when it comes to supporting their employees. They must continue to ensure that they are providing the support that their staff need to navigate the rest of their financial lives with confidence. By taking some of the measures described above, employers will empower their workforce to take charge of their financial futures, fostering a more confident and financially secure workforce for years to come.

About Author:

Chieu Cao is the founder and CEO of Mintago, an FCA-regulated company that provides its users with the UK’s most complete and inclusive financial wellbeing solution. By equipping its users with financial planning tools, over 1,000 pieces of educational material, access to financial advisers, a Money Helper AI and a dashboard that allows for full pension management, Mintago helps businesses support their staff during the cost-of-living crisis and supply them with everything they need to navigate their financial lives with confidence. Mintago can also assist businesses in saving thousands in NIC, as well as providing their staff with direct savings.