HR Grapevine podcast: Financial wellbeing: Your employees are counting on you 

Erik Niewiarowski

from HR grapevine.com, it is the HR grapevine podcast. Hello everyone, Eric Niewarowski here, host of the pod, thank you so much for joining me again this week. And this episode is the fourth instalment in our special Workplace of Now series presented along with our partners at Zellis.

Now in case you don’t know, Zellis are the UK and Ireland’s leading provider of payroll and HR solutions. Their focus is on delivering successful partnerships with customers, helping to deliver successful business outcomes, provide modern and intuitive digital experiences and most importantly, make every employee feel appreciated for the work they do.

So in this episode of the workplace of now, we are going to talk about financial wellbeing, and why it is so important for HR teams to support their colleagues, their employees, especially as the UK is in the midst of a cost-of-living crisis. So, to do that, to help me unpack all of this once again, I’m joined by Gethin Nadin, he is the Chief Innovation Officer at Zellis. And he’s also a best-selling author and an expert at all things employee wellbeing of which financial wellbeing is a huge part of it.

So, there’s a recent statistic that say 70% of employees say they are stressed about money. And friends, I gotta be honest, I am one of them. So, Gethin is going to help me unpack what employers can do to support their employees through this crisis. Some practical ways employers can mitigate the cost-of-living increase with their employees and what part payroll plays into an employee’s financial wellbeing. As always, it was a very insightful conversation with Gethin, and I hope you enjoy.

Gethin Nadin

Hi, everyone. So, my name is Gethin Nadin, I’m Chief Innovation Officer at Zellis but I’m also an award-winning psychologist and a best-selling HR author, have a very keen interest in financial wellbeing so really excited about this conversation today. I’ve been talking, researching, and reading, consulting on financial wellbeing for about a decade now. So, work with employers all over the world to talk about specifically financial wellbeing so it’s never been more relevant than it is at the moment, I think, for our people. So yeah, looking forward to having this chat with you.

Erik

Yeah, Yeah, same here, you know, certainly in HR grapevine.com, we have been writing a lot about the cost-of-living increase, the rise in inflation, and it seems like since the last time we talked, even this concept of financial wellbeing has even gotten more talked about – and really more dire – when you think about reports of like, you know, people having to ride the bus to keep warm or choosing to heat their homes over feeding their families. So, there’s definitely something that HR leaders and business leaders can do to help their staffs financial wellbeing. So, with that being said, 70% of employees are stating that they are currently stressed about money. I’m definitely one of those 70%. So, what can employers do to support employees through this cost-of-living crisis that we’re going through?

Gethin

I think first of all, it’s quite important that we all fully understand just how difficult the last few years have been for employees, especially those under 40 and the low paid. So, we know that by early 2021 employees said they were twice as likely to run out of money by the end of the month compared to 2020. And now nearly half of all UK families report falling into debt because of the pandemic. So even before the cost-of-living crisis was a thing. people were really, really struggling. And we if we look at data from the ONS in the UK, it’s the largest threat to our physical health we’ve ever seen. It was actually financial wellbeing that British employees said was their biggest wellbeing concern over the last couple of years. You know, half of Brits now say that COVID-19 increased their cost-of-living. StepChange in the UK, their January 2022 research revealed that one in three people say they’re struggling to keep up with their bills and credit commitments – and that’s double what the figure was before the pandemic. So, before we even begin to start talking about the cost-of-living crisis, employees around the world were struggling, and those under 40 In particular, which is roughly half the workforce in most organisations, and now, economically speaking, of the unluckiest generation in history. They have it officially harder than anyone else at work. And this has been a combination of things like slow wage growth, rising house prices, shrinking gross domestic products, the pandemic itself, and now this cost-of-living crisis. But at the time of recording this podcast episode, you know, we even start seeing the news today that young workers have been priced out of the rental market. More and more young people are moving back in with their parents to manage the cost-of-living crisis. But I think it’s important as well, for employers to note that the crisis isn’t just about money in itself. Money has kind of long been a significant stressor in most people’s lives. It’s the number one reason why Brits say they can’t sleep at night. It’s the number one primary reason behind things like divorce and relationship breakdowns. And there’s a direct cyclical relationship between money and mental health. So, we know that those people who’ve fallen into problem debt are more likely to develop a mental health condition. And those people with a mental health condition are far more likely to fall into problem debt. So, when we talk about financial wellbeing at work, we’re talking about this kind of universal link, I think, between ‘all we ever hear about is wellbeing.‘ And so, I think when we think about how employers should help, we’re not just looking at ‘how do we soften the blow of the crisis?’, but to deal with the consequences of the increased stress and pressure I think people are feeling. And so, I think employers need to think about, you know, are we being mindful of what’s going on outside of work and the stress and pressure? Are we making sure that we’re showing up for them? Are we there for them? Are we openly acknowledging that this is a stressful time and reminding our people of all the ways that we support them? So very much in the same way that lots of employees did during the pandemic? Are we reminding people that, you know, we have access to counsellors, we have access to mental health experts, you can visit clinicians and experts, etc, we have all these things in place that can help you deal with a stressor, whether that stressor is money or anything else.

And so I think, first of all, that’s probably important to know is that, there’s going to be a continued mental health impact of this crisis, which, as we know, is kind of obviously clearly compounded by the pandemic anyway.

Erik

Yeah. So you know, again, through my American lens, for those of you listening at home, I am American, when I left the states, you know, and it’s still a debate. It’s this whole concept of ‘fight for 15’. Right? So it’s a $15 minimum wage. Business owners are saying, ‘well, that means we have to increase the price of our quarter pounders by 35 cents‘ and stuff. And so from what you’re saying, with this being a cycle, the problem isn’t being solved by just throwing more money at the solution. So really, what else does it entail, aside from just paying your employees more, because a lot of businesses just simply can’t afford to how do we what’s the first step to get out of this cycle that you just spoke of?

Gethin

Yeah, I mean, I think I would advise anyone that can pay people pay rises to pay them as much as possible. I think clearly, money is a compounding factor here, for example, I think an employee with a salary of 30,000 pounds in the UK, would need to see a nominal wage growth of about 7.1% this year just to maintain their standard of living. We’re currently forecast a 5% annual inflation rate. And so with lots of estimates putting the average UK pay rise at about 3.4%. This year, even those employees who benefit from pretty generous pay rises, are still going to find themselves having to cut back. So that combination of slow wage growth and the rising cost-of-living is actually going to feel like a 4% pay cut for most average earners. And so that’s pretty significant. So, exactly, as you’ve said, you know, if you can throw money at it, great, but you’re gonna have to throw a lot of money at it just to get people to the position that they probably should have been. I speak to employers all the time that are offering pretty generous pay rises of between three and 4%. And actually, all that’s doing is just mitigating the cost of the electricity or gas has gone up. So people aren’t in a better position, even with really generous pay rises. And that’s not withstanding the Bank of England’s advice, not to give people pay rises, because actually protract this whole situation a bit longer. But I think it’s important for us to note that, you know, whether the stressor that sits outside of work was the pandemic, or the cost-of-living increase, we have to support the wellbeing of our people, money is a big stressor in people’s lives. Lots of us have a negative relationship with money. And I think, as well as some of the practical things we can do, which I’m sure we’ll come to talk on later. I think it’s just being mindful that it’s a very stressful period for people. And they’re feeling pressure on top of feeling pressure for a different reason over the last two years. And it’s not a fun time for most people at the moment and hasn’t been for a couple of years. So we just need to be mindful that, you know, we have to support that people are struggling emotionally, stand up where we can and help them.

Erik

I guess what I’d like to know in your experience, what are some of these practical ways that are aside from giving money or offering mental health would things like meal programmes, free lunches, and maybe like coming back to the office can factor into this too as you cut down commuting costs? What are some practical things employers can do? To help people keep just a little bit more money in their pocket.

Gethin

Yeah, I think some of the examples you said there are really interesting because I think it’s us as employers being mindful that,there are lots of levers we can pull here, and offering people free food in the in the office can help people to save money, even if it’s just five pounds a day on going to a sandwich shop, whatever it might be. And that will start to compound and have an impact on people, especially the lower paid you are, the bigger the impact that will have. But then you’ve got to balance that with people have commuting costs. And coming to the office, where they haven’t necessarily done that in the same way over the last couple of years will be an increased expense. I think being mindful of how we run things like expenses. So, if we need our employees to go and catch a train, that kind of stuff, will they get that if they have the outlay the money first, will we pay that back to them in a timely manner? where we allow them to book on company credit cards, or get the finance team to book trips in advance? And so we’ve just really been mindful of all these different nuanced ways that we could positively or negatively impact people’s finances, I think we’re going to start to see an impact. And we’ve obviously started to see this already, but we’re gonna see an even bigger impact on employee living standards.

We know the hardest hit will be kind of middle- and low-income families, which for most companies will, again, constitute all their employees. But if we look at data from the IFS in the UK, we can see that while lower income households are hit disproportionately by the increase in things like fuel and gas prices. overall inflation rates are similar, regardless of how much you get paid. And we know that poor households will feel the cost-of-living crisis more than others. But even those middle to higher income households, will also start to see themselves paying more for the things that they spend more of their budget on. So, the more money you’ve got, the more you’ll spend on things like hospitality and travel. So actually, I think that’s going to start to lead to people cutting out or cutting down on things like entertainment. And that’s obviously going to have a negative impact on other areas of wellbeing as well. And so, you know, I genuinely feel for lots of employees, because I think, for many, this is going to feel like another lockdown, because we’re going to be restricted in the things we can do with the increased pressure, and stress is going to hit people’s employee wellbeing. And there’s going to be an increase and more mental health, undoubtedly, there’s going to be increasing sleep problems. And even those higher income households will have to tighten their belts and adjust their spending. And so after these few stressful years, many will find they still can’t go on holiday, they still can’t have time away from work, because they simply won’t be able to afford to do those things. And that’s going to have a knock-on effect on their performance at work. And, and so if you think about some of the things, I think employers can be doing to offset some of this stuff is, you know, being mindful of the things that employers can do to get the investment and buy in they need from their board to spend money on this stuff is going to be important. If you’re going to offer new benefits, if you’re going to offer new tools, whatever it might be to support people, you’re going to need to be able to justify that internally. And so, I think lots of this is important to understand, so that when we build that business case, we’re not just going back and saying, ‘Look, we need bigger pay rises,’ or ‘we need bigger benefits’ we’re able to articulate the effect, it’s having on our people; ergo the effect it’s having on our business if we don’t step in. So I think some of that setup stuff I’ve gone through is important to understand. And there’s a great quote that I heard years ago, that goes,

‘nobody comes up with a great idea while being chased by a lion’.

And I think that’s what’s happening here, right, we can expect our people to deliver the best customer service to build great products or to sell loads, while they’re under huge amount of pressure that’s distracting them. So, I think anything an employee does to support their people, the crisis at the moment is, is an investment in the resilience of their own business. I think doing what you can with what you’ve got is really, really important. And so, I think that’s a conversation I have with a lot of customers is just do what you can if you’re starting to impact somebody’s pay positively by just five pounds a week, then do it. But yeah, that’s scattered, that starts to add up right and exactly use that, some of the cost creases increases, you’ve seen, all we’re doing is pulling levers to try and mitigate the some of those costs having a negative effect. And I think one really interesting thing that we’ve seen, that I’ve been talking to customers and employees around the world about is ‘how can we do these small things that will change employee behaviour that will get them to kind of save money or improve their financial wellbeing?’ And I think that’s important because we know that when people feel more in control of their finances, they feel more confident in their financial future. And I think at a time when so much is out of an employee’s control when it comes to their finances. What employers can do to make them feel like they have more control and help them to make some better decisions is really important.

And so what we’ve almost started to see is this renaissance of employee discount schemes, a core feature of employee wellbeing and financial wellbeing has always been, ‘how do we make net pay go further?’ And I think in the face of this crisis, discounts and encouraging employees to use them might become quite a vital component of a kind of financial wellbeing strategy. And just one example of a calculation I made recently, for the average earner in the UK, the National Insurance increase that came in in April 2022 equals out to about 250 pounds. So, for the average earner, they’re going to pay about 250 pounds more in tax. The average UK household spends about £5,000 a year on food. And if we encourage employees to start to pay for their grocery shopping, using digital gift cards, which most employer schemes do tend to offer, the average earner can actually save enough money to completely mitigate that national insurance tax rise. So, what you’re able to do, and maybe this is part of the communications method, you’re basically saying just an employee, ‘This is a rise that’s going up, this is a way we’re giving you of mitigating that rise.’ And so suddenly saving a few pounds a week or a month on your saving on your grocery shopping doesn’t seem like much, but in the context of if you do this thing, you will not feel the effect of the tax rise becomes a lot stronger. And so I think there’s – and again, I’m sure we can talk about this a lot more – but there’s, I think, a huge amount of potential that’s unlocked sitting in Employee Benefit schemes at the moment that many employers can just literally feel like they’re pushing a few buttons to start to make an impact.

Erik

Yeah, this is hitting everybody, regardless of pay, right? Utility costs are up for everyone. And it certainly impacts that sort of quality of life that higher earners have gotten accustomed to, you know. And then now these digital subscription things, we had things like Perkbox, right, we’ve written a lot about how employees have wanted benefits to kind of change their work, perks changed throughout the pandemic, free gym memberships – not so much during the pandemic – but maybe now that’s a good chance to bring it back in. Because fitness is a great mental and therapeutic thing for mental health. Right? So, let’s talk about a little bit more, you know, with you being the Chief Innovation Officer at Zellis and Zellis being the payroll specialist, how important is payroll through all of this? And I’m going to slide in another question there to you. What is your opinion on these ideas that some companies have started rolling out these sort of advanced payment schemes? What are your thoughts on that?

Gethin

So the Zellis Group recently purchased an organisation called WrkIt, who offer employee discounts. Zellis Group, we’ve been working with them for hundreds of customers across the world for quite a few years. And so, they joined the business group in December last year. And, you know, we’re rolling out those discount schemes now to more and more employers, because I think it’s pretty low cost and pretty low commitment from an employer’s point of view. But generally speaking, if you look at the calculations we’ve done, we think the average person in UK you can easily save £1,000 or €1000 through just changing some of their shopping to some of these discounts. And so the effect of each one of those discounts is quite small, but collectively they start having impact. So, you know, if anyone obviously wants to talk about that, anyone that was part of this group can have a conversation about those. And I think that starts to play into why this group as a payroll provider, and benefits and reward provider has now added things like discount schemes to it. Because we’ve started to focus more on financial wellbeing from payroll, and I think, you know, for most employees that payroll, is where 100% of their income comes from. It’s so it’s actually I think, really important, it’s probably an arguably the first step on the financial wellbeing ladder in many ways. But as an industry, I think financial wellbeing has become a wide range of different kinds of products. It’s become workplace savings, investments, payroll, lending wage advanced, you just mentioned financial education, but I think we’ve leapfrogged over a lot of the basics, we started to go straight to product without really thinking about

‘Do people have the skills and the behaviours and the knowledge that we need them to have to make better financial decisions?’

I think payroll has to be the starting point to an employee’s efforts to support financial wellbeing at work. I think that means doing more to help employees to understand their payslips, to recognise mistakes, and to feel comfortable asking questions and raising concerns about pay. I think this means that we have to simplify the terms we use, clarify lots of the acronyms we use, just present information in a more clear and concise way which alarmingly most payroll providers just don’t do. So, I think for many people – as that is their only source of income, understanding that money at source is critical on that journey of financial wellbeing.

And employers, a really basic part of this is employers need to ensure that payroll is accurate and timely. As part of this, Zellis Group have got some brand new research coming out in the next couple of weeks that shows the implications of payroll mistakes on employee financial wellbeing. And we found that they are very serious and wide ranging. More so in the current climate where people are understandably very concerned about their money. And I think ultimately, every employee needs to explore and kind of recognise the connection between low confidence with numbers, low financial literacy, lack of engagement, payroll, and an overall kind of wellbeing and mental health. And so, I think helping people to better understand payslips helping people to understand and be confident that they’re receiving the right pay and benefits. And also, I think, for our people to appreciate and engage with their benefits more, we have to help them to have a much better understanding of those contributions and deductions that they’re getting for their hard work. And as part of this new research, we also looked at confidence in numbers and how that affects employees. And what we found was that actually, it impacts their mental health and their overall wellbeing. Well, levels of confidence with numbers don’t always align to the levels of competence or capability. Our research did prove that being confident around numbers has significant benefits to employees in terms of wellbeing and mental health. And if you think about it, we bombard our people with stats and data and figures every day, you know, what percentage goes into their pension? And I would challenge anyone listening to this to tell me straight away what 7% of their salary is, most people are not going to work that out, because most people are terrible as percentages. I have no clue. Otherwise, when I ask people that question, without even knowing it myself, but the latest tax increases, I was with a customer recently, who had a huge number of calls to the HR and payroll team, because of the tax increase that came in in April, where people saw their pay go down. And people didn’t understand why. And despite the fact that this employee had done lots of communications to say, this is coming, your pay is going down. This is what the tax represents. It’s not us, it’s the government, people still didn’t fully understand why as my tax has gone up, and why those deductions increased. And so, I think, you know, our research found that, you know, just under half of people told us they lacked number confidence when using numbers at work, and only one in seven people claimed to be very confident about their numeracy skills. And we also found high numbers of employees who don’t feel confident about understanding or spotting error on their pay slip. So, half of employees we surveyed said, they aren’t confident they’d actually be able to identify a mistake. So, whether they got paid less or not, whether they were on the wrong tax code, whether their deductions were too much. Even when it came to things like net pay, a quarter of employees said they wouldn’t be able to spot an error. And so again, yeah, about 40% told us, they aren’t fully confident that they even understand their pay slip. And that rises to 55% when somebody says they have low confidence with numbers. So when somebody has low confidence with numbers, all of these figures go up. And so I think at a time when every penny counts, making sure people are equipped to make sure that they’re getting paid, accurate and notifies of any mistakes is really, really important. And why is that important? Because unfortunately, what we found was that when employees do experience in error in their pay, the implications were actually pretty serious in terms of mental health and financial wellbeing.

More than half of employees told us that a mistake with their pay would lead them to develop stress and anxiety. And half of people said that it will lead to financial difficulties such as being able to pay rent or other bills. So people told us they’d have to borrow money or families, they’d lost motivation and lose productivity at work. They even told us they think they might they would or in the past have developed health or relationship issues due to being paid inaccurately or not in time. So yeah, I think payroll plays a really important part. I think, if any of us thinks about a time in our past, which has probably happened, where deductions have been too high, or we’ve been missed off the payroll, you know, in the UK, at the moment, about half of people say they have less than 500 pounds in savings. And so people are living pretty precariously. And so, if you delay their pay by just a couple of days, especially if you get paid on the first and that’s the day your Direct Debits come out, people are going to be pretty screwed. And that’s at a time when their finances already really stressed. And so, yeah, I think payroll plays a really important part. We can’t afford to be making mistakes. We’ve got to help people to understand pay better. And thankfully, obviously, on the back of this research, that’s exactly what the Zellis Group are doing.

Erik

Yeah. And so that is just at the base level for the employee. But what if something else happens that they have to spend more money quickly? It’s an awful cycle. So I want to be mindful of your time so I’m just gonna lob another softball at you to wrap this up today. And thanks again for joining us. But you mentioned all of these things. You know, explaining how the payroll process works in the deductions, what’s the best way that HR teams can communicate that to their employees?

Gethin

Yeah, so I think, you know, we have a lot of evidence that when you improve somebody’s competence with numbers, when you improve somebody’s financial literacy, when you deliver more financial education at work, people make better decisions with the money they’ve got. And that’s universal, it doesn’t matter how much somebody gets paid. So, there is a place here for financial education in the workplace that I’m really passionate about. And if the UK goes back into a recession later this year, which I think seems pretty inevitable at the moment, we also know and have evidence that in times of recessions, and financial difficulties as a society, financial education becomes more and more important. So actually, the Brookings Institute in the US found that during the 2008 financial crisis, if people had a better understanding of economics and financial products, we would have weathered the 2008 financial crisis better. We know now that offering those tools, offering that education is really, really important. So I think some of the simple ways we’re seeing customers offer things really effectively, is small bouts of financial education. As part of this group, we offer a product called Safe smart, we’ve seen customers use that really, really effectively. Compounding that with discounts, which are enabling people to make that net pay go further. And then you’re starting to set put tools in place where people can get confidence that a problem will be solved, as soon as it can. So an example of that is, we’ve been working with an organisation called Switched, who will automatically switch you to a better energy deal. Now, obviously, for the last year or so that’s been pretty dormant. But just by getting that set up and done, you can have confidence that as soon as any energy prices start to drop, hopefully towards the end of this year, beginning of next year, you will automatically be switched to a better deal. And so again, I think some of this confidence is that’s a problem that solves that setup. And we’re also working with mortgage switching companies that are still able to save people money now, they’ve recently saved me £300 on my mortgage for the year. So it actually starts to happen. I know that’s that’s £30 here, that £10 there, that starts to add up. So I think taking this kind of multifaceted approach, looking at all these different pulleys and levers you’ve got across pay benefits, and the other tools that you can offer that bring all that stuff together. And even if you have that aggregation of marginal gains, where you’re just improving little areas of employee’s lives, collectively, I think that starts to add up to a big difference. But I would generally say, for anyone listening, do what you can doing, something’s better than doing nothing at the moment.

Erik

Well, Gethin Nadin, definitely the right person to have on this podcast talking about financial wellbeing and thanks so much for joining us today.

Gethin

Thanks for having me.

Erik

Well, once again, I just like to thank Gethin Nadin, Chief Innovation Officer at Zellis for helping me unpack all things financial wellbeing in 2022 and beyond. And for me, one of the biggest takeaways that I got from this conversation was really coming to terms with the cycle of financial wellbeing, how it impacts employee mental health, and why it’s so important for HR teams to really offer support for their employees, especially when it comes to personal finances. So, I hope you enjoyed it as well. Thank you again so much for listening. Thank you to our partners at Zellis, and we will speak to you next time for another edition of the workplace of now.