If we had some eggs…

Steve Herbert, Head of Benefits Strategy at Howden Employee Benefits & Wellbeing considers why supporting financial resilience might be the next stage in the evolution of Employee Wellbeing

There was a popular saying used by Londoners during the Blitz;

“If we had some eggs, we could have eggs and bacon, if we had some bacon.”

In that one simple line they captured the challenges of not being able to have everything – or indeed anything – that you want, and being pragmatic and realistic about the situation.  Sadly this same spirit was not on display during the early stages of the COVID-19 pandemic in the UK, when some of the less pleasant inclinations of a frightened population rose to the surface in a buying-frenzy, which left supermarket shelves without every conceivable item, from eggs and bacon to toilet roll and bleach.

Which reminded me of this, rather darker, quote from one Lenin (Vladimir);

“Every society is three meals away from chaos.”

Now Comrade Lenin was wrong on many things, but here he certainly had a point.  Because the truth is that people do indeed often react badly (or at least very irrationally) when under threat or in stressful situations.  The buying frenzy was a classic example of exactly that.  And whilst that particular challenge appears to have passed, we should perhaps now be better preparing for other challenges that may lie ahead.


Three meals or three pay cheques?

Because uncertainty remains with us all as the COVID-19 pandemic continues.  Aside from keeping safe and well, the next challenge for many may not be about where the next meal will be sourced from, but how it will be paid for.

Because recent figures suggest that large swathes of the UK population are woefully unprepared for a drop in their monthly incomes for any period of time.  Figures from The Money Charity in March 2020 indicate that 12.8 million UK households had less than £1,500 in savings (and of course many had none at all), and yet the average household debt stood at in excess of £60,000.

That would be concerning at any time, but as the United Kingdom enters its 7th week of full lockdown many household budgets will already be starting to buckle under the strain of a period of a reduced income.

There are currently millions of employees experiencing a period on furlough, with some losing up to 20% of their income during this period.  Other workers have already been asked to take a pay cut, and many more might expect a similar challenge to come soon.  And of course regular bonus and sales-related payments are likely to be drastically reduced for large swathes of the working population in the months immediately ahead also.


So how resilient are household budgets?

Experimental statistics issued by the Office for National Statics last month suggested that nearly three in every four (73%) of households (where the main breadwinner is an employed worker) in Great Britain has sufficient financial assets to cover a 25% fall in their household income for a period of three months.

And a separate survey by Cicero at the start of the crisis suggested that over two-thirds of household are confident that they will be able to hold out for the 12 weeks of economic lockdown being suggested at the start of the crisis.

Yet these rather positive figures disguise the reality that many workers and their families will already be struggling, and the longer it takes to return to anything approaching pre-crisis normality, the less financial reserves households will have to fall back on.  Indeed the Cicero survey suggested that just two in five households are confident that they can hold out past 3 months, and just 15% of adults feel that their personal finances will be able to survive the financial shock regardless of how long the coronavirus crisis lasts.

It should of course be noted that since these figures were collated there have been a variety of initiatives from both State and Private sector to help people survive the immediate impact of the lockdown.  Welcome as these initiatives doubtless are, they are only intended to be short-term solutions, and in many cases are doing little more than deferring payments – but not necessarily the interest accruing – on monies owed.  Ultimately these debts will still need to be settled, and possibly from a new and lower income level too.

And regardless of any extra flexibility on existing moneys owed, the reduced income for many will also mean that household borrowing is likely to soon be on the rise again.  The truth is that a vast number of financially vulnerably families are likely to emerge from this lockdown period in a much worsened financial state.


Debt makes people do dumb things

But is this really an employer problem?

I believe it is.  After all a financially stressed employee is unlikely to be as focussed and engaged as their employer would want or expect them to be.  This can lead to all sorts of potential employment issues, at a time when very few organisations can afford anything less than 100% productivity from every single worker.  Problem areas might include absence, workplace relations, stress, mental health, and even higher staff attrition.

But there is one additional area that I suspect very few employers actively consider; Does financial stress have a negative impact on employee decision-making during the working day?  A recent report from the Financial Inclusion Alliance states;

“A person’s cognitive function is diminished by the constant and all-consuming effort of coping with the immediate effects of having little money.”

And the report went on to suggest that people under financial pressures make mistakes that might otherwise be avoided.  The report even went as far as to state;

“Experiments show that the impact of financial concerns on the cognitive function of low-income individuals were similar to a 13-point dip in IQ.”

Or, to put it more bluntly, debt can make you do dumb things.  It is yet another example of a very human reaction to a threat; in this case owing more than can be comfortably repaid from a stagnating or reducing income.

So debt is bad for the employee and their family, but it’s also bad for their employer too.  And never more so than when the nation is seeking to bounce-back from the financial impact of the coronavirus lockdown.


What can be done?

So what can an employer do to help in this situation?

This is a particularly pertinent question given that the challenges of the moment mean that direct financial assistance (in the form of significant pay-rises or bonuses) are unlikely to be an option for many employers in the months – or possibly even years – immediately ahead.

Yet there are still some simple, cost-effective, actions that employers can take to offer practical assistance to employees in financial distress.

As a starting point I would encourage many more employers to establish some formal procedures to provide assistance to employees with money worries.  Howden’s research undertaken before the coronavirus crisis hit found that as many as 96% of employers believed that at least some of their workers were experiencing persistent money worries, yet 4 in 10 organisations still had no formal procedures in place to help those same individuals.  So employers should look to formulate a plan that will, at the very least, signpost workers towards some useful and practical assistance.

The assistance offered will vary depending on each employer’s structure and workforce.  Below are just a few ideas for consideration:

  • Employees can be signposted towards the company-sponsored Employee Assistance Plan (EAP), which usually includes confidential debt counselling services as a standard service.
  • Then there are debt charities, which exist to provide free support and assistance to those that can’t see a way out of debt. Again signposting here will ensure that workers have somewhere to turn to in a crisis.
  • Another option to consider is the introduction of a Workplace Finance provider to offer financial services to employees. Such a service is provided without direct cost (or monetary risk) to the employer, and allows employees to source credit on competitive terms based on more than just credit score alone.  Workplace Finance providers usually also include the option of short-term saving products too, enabling all employees the chance of building-up some resilience to those unexpected financial challenges of the future.
  • Finally, and certainly not least, don’t overlook the power of workplace* Financial Education Simple yet informative sessions designed to engage and educate employees on the basics of finance can make a significant difference to how individuals react to financial challenges.  In particular a focus on better budgeting and simple strategies to escape excessive debt is likely to be an important topic in the months immediately ahead.

A time for solutions

The bottom-line is that embedding financial wellbeing across your workforce may be one of the most pressing new concerns for HR professionals to tackle once the nation has returned to the workplace.

Earlier in this article I quoted Lenin (Vladimir), so let’s move seamlessly to a quote from Lennon (John) to conclude this article.  The Beatle once famously said;

“There are no problems, only solutions.”

Those workers facing genuine financial hardships might not feel this is entirely true, but even in these challenging financial times employers can do their bit to signpost workers towards practical and cost-effective solutions that will help workers, their families, and the employer too.

Steve Herbert is Head of Benefits Strategy at Howden Employee Benefits & Wellbeing


* Howden’s range of financial wellbeing solutions can be delivered directly to employees in the workplace, or remotely via conferencing and technology solutions