- Wellbeing
Cost of living and its impact on employees: Top tips for managing your money
Maji – a holistic financial wellbeing provider
with Alison Brown, Health & Wellbeing Specialist
With the rising cost of living, many employees are feeling the strain on their finances. Inflation, increased energy bills, and higher everyday costs are creating financial pressures that can impact not only personal wellbeing but also work performance. Research shows that 13% of UK adults have no money set aside as an emergency or ‘rainy day’ fund. This plays a pivotal role in the domino effect of poorly managed finances and increasing debt figures in the UK.
Understanding how to support employees in navigating these challenges and managing their money effectively is essential for maintaining employee productivity and the longevity of your organisation.
How the cost of living affects employees
These challenges highlight the importance of offering financial wellbeing programmes to support employees during times of economic difficulty:
1. Reduced Disposable Income
As the cost of living rises, especially due to increased housing, energy, and food prices, employees may find that their wages don’t stretch as far as they once did.
2. Increased Financial Stress
With higher costs of essentials such as rent, utilities, transportation, and groceries, employees may experience more financial pressure. This stress can spill over into their work lives, leading to decreased productivity, absenteeism, or presenteeism, where employees are physically at work but mentally distracted by financial worries.
3. Greater Reliance on Credit
In response to rising living costs, many employees may turn to credit cards or loans to cover everyday expenses. This can lead to a cycle of debt, exacerbating financial anxiety and affecting employees’ long-term financial wellbeing.
Employers that recognise this impact are better equipped to support their teams by offering resources and tools to manage financial pressures.
The opportunity for employers
Employers who offer a financial wellbeing solution to their employees are better positioned to help their organisation improve the following metrics:
1. Increased productivity and engagement
50% of employees reported to be less productive at work when experiencing a financial crisis. Employees who are receiving adequate support and guidance are primed to be more productive, valued and clear headed when on the clock. By offering financial wellbeing support to your employees, your organisation can reap the benefits of a more engaged workforce.
2. Reduced absenteeism
Hand in hand with productivity levels, employees who feel confident about their financial security often have fewer absences or sick days taken from work . Financial stress can cause both stress-related illnesses or mental health challenges which your employees can improve with appropriate levels of financial wellbeing support from their employer.
Organisations can benefit from a more present workforce, ensuring your project teams are dedicated to servicing your clients and partners.
3. Lower employee turnover
26% of employees reported that they will leave their place of employment if the cost of living crisis worsens in the next 12 months. This is a huge threat for all employers, but also an opportunity to foster a culture of trust and value with employees by offering solutions that positively impact their life outside of work. An employer who tailors their employee wellbeing strategy based on employee data will reap the benefits of positioning themselves as a trusted employer of choice.
4. Engage all employees equally
A holistic financial wellbeing solution allows employers to tailor support to meet the unique needs of various employee groups, ensuring no one is left behind. This approach is particularly important when considering Diversity, Equity, and Inclusion (DE&I) initiatives. A one-size-fits-all solution may miss critical opportunities to engage employees from different backgrounds or those facing specific challenges.
Money management tips for employees
80% of employees look to their employers for financial guidance. While this is a big responsibility, partnering with a financial wellbeing provider is a no-brainer when it comes to offering your employees a solution that meets their ever-changing needs.
A financial wellbeing solution can help your employees form the foundations of long-termfinancial sustainability by providing tools that assist them with:
1. Tracking spending
Knowing where your money is going is the first step to managing it effectively. Employees can use budgeting apps or online tools to monitor their expenses and see where they can cut back. Small changes, like reducing subscription services or eating out less, can add up quickly and free up extra cash for more essential needs.
2. Reviewing financial commitments
Taking a closer look at regular outgoings, such as rent, mortgage payments, utilities, and debts is a great way to stay ahead in the cost of living crisis. This exercise will help employees uncover whether there are any areas they could renegotiate terms, switch providers for better deals, or pay off high-interest debts. Being proactive about managing financial commitments can help ease the burden.
3. Building an emergency fund
An emergency fund can serve as a safety net in times of unexpected financial strain, such as car repairs, medical bills, or job changes. It is recommended that UK adults set aside at least 3 to 6 months of living expenses as an emergency fund. The key here is to enable your employees to start small, contributing what they can regularly to build their fund over time.
4. Maximising employee benefits
Many employers offer financial wellbeing support as part of their employee benefits strategy, such as salary sacrifice options, savings plans, pensions, or access to financial coaching. Salary sacrifice schemes are the best way to create immediate impact for both the employer and the employee, with tax savings being the main driver for these schemes. A popular scheme is the workplace nursery scheme – a great way to support new parents in your organisation with additional savings and support. These benefits are designed to help your employees manage their money better and make a difference during times of financial uncertainty.
5. Seeking financial advice
Sometimes financial challenges are too big to solve on our own. In the case of your employees needing guidance or advice, it is imperative to work with a financial wellbeing provider that allows access to suitable financial experts. In order to choose the right type of financial expert, it’s important to know what functions each expert is qualified to help you with . Financial experts constitute financial coaches, whose role is to provide support and guidance through particular challenges, as well as financial, mortgage and debt advisors who are qualified to give advice on your financial plan.
Supporting employees in tough times
Employers can play a significant role in helping their workforce manage the impact of rising costs. By offering financial wellbeing solutions, providing flexible benefits, and fostering an open dialogue about financial concerns, companies can reduce the negative effects of financial stress on employee morale and productivity. Encouraging employees to take control of their finances through education, tools, and professional advice will not only benefit their personal lives but also improve overall workplace satisfaction and engagement. In times of financial pressure, a little support can go a long way.
This article is brought to you by Maji
Maji is the financial wellness solution that helps employers build a thriving workforce. By providing personalised 1-1 coaching and intuitive financial tools, Maji helps individuals improve their financial health, leading to significant savings for employers. Our comprehensive platform addresses the root causes of financial stress, enabling employees to make informed decisions and build a secure financial future.
Help your employees thrive, not just survive – with Maji Financial Wellbeing.
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