How employers can support financially vulnerable employees

16 May 2024

In uncertain economic times, it can be difficult to remember those who are most financially vulnerable when we are all feeling the pinch. To effectively support everyone in the workforce, we must first understand who is likely to be most high risk of experiencing financial hardship or instability.

Financial vulnerability can manifest in different ways and is influenced by various economic, social and personal circumstances such as:

  • A lack of financial literacy: Financial literacy is the ability and knowledge to make smart decisions with money. Although many of us may think we know how to manage money- almost 3 quarters of people in the UK struggle with financial literacy, according to a survey by Shepherds Friendly.
  • A lack of savings:  insufficient savings or not having an emergency fund can leave many people without a safety net should something unexpected happen (eg losing a job or medical emergency) 1 in 7 people in the UK have absolutely no savings, 34% have less than £1000 rising to almost half for those 18-24. Younger generations will be financially vulnerable in terms of savings, however many are vulnerable as they have been left with no option but to use savings for covering the essentials.

Providing financial education/workshops or access to financial advisors can help staff better understand their savings and investments and make more informed financial decisions- helping to reduce financial vulnerability in terms of saving. Financial advisors can offer personalised advice and help reduce financial burden with various tools and strategies.

  • High levels of debt: In the current economy, many are forced to use credit cards to cover essentials or take out high-interest loans that could make it difficult to manage monthly repayments on top of bills. Research by Nationwide found that 63% of people in the UK are worried about finances and their ability to cover essentials and almost 4 in 10 have had to use credit cards to pay for essential household bills (those earning up to £25,000. For those earning £45k-50k this figure increases to 44%).

Half of people in problem debt have a mental health problem (Money and Mental Health) ensuring the right level of help and support is easily accessible is crucial to help protect mental health as the economy does not look to be improving any time soon. Almost 40% of people with a mental health problem say their financial situation worsens it (Money and Mental Health) with long waiting lists and overburdened mental health services, robust EAPs can help bridge the care gap for many in need of clinical mental health support.

Access to money management programmes or signposting to debt masterclasses help to establish repayment plans and future strategies to avoid debt further accumulating and protect current states of financial wellbeing. Employers should offer a degree of flexibility with working environments/hours (where possible) to help employees make savings that suit them – eg staying home to save on the commute or going into the office more often to save on household bills.

  • Child/care responsibilities: According to research by YouGov, almost a quarter (24%) of parents in the UK have skipped a meal in the last year to feed their children. Unfortunately, that leaves many women more financially vulnerable than men in the current economy. A report by Legal & General found that the average salary for a woman in the UK is £23k, compared to £31k for men. Additionally, the Centre for Progressive Policy found that In fact, almost half of working women do 45+ hours of unpaid care work each week, compared to an average of 17 by men – leaving women in a disproportionately more vulnerable position than men.

It is crucial employers are fair and actively working towards closing the gender pay gap, ensuring women are paid the same as male counterparts for the same jobs/responsibilities and are offered progression opportunities to increase their salaries and meet career goals.

  • Unforeseen circumstances: such as an illness or loss of a breadwinner can spiral financial insecurity and may impact an entire family. Salaries are only stretching far enough and need to ensure they are realistically set to deal with inflation and the cost of living. Providing benefits such as group income protection can help offer peace of mind should something unexpected happen, helping employees remain financially stable in the face of uncertainty.

Offering financial help such as access to discounts or helping cover costs of health and wellbeing benefits can help protect employee wellbeing and provide access to things vulnerable cohorts may otherwise be unable to afford. Eg:

  • 28% of employees chose Retail & Leisure Discounts as their top benefit.
  • 22% of employees chose Free/Discounted Gym Memberships as their top benefit.
  • Only 6% of employers believe their organisation is very good at supporting budgeting and money management.
  • 48% of employers do not offer financial wellbeing benefits/services.

Regular check ins and communications to remind employees of what is available to them may increase utilisation and help keep support front of mind for when it is needed most.

It is important for employers to remember that a safe and supportive environment to help meet all employee’s financial needs is an ongoing effort. Data driven decisions are key. Regularly and proactively assessing the effectiveness of implemented initiatives is needed to ensure employee’s evolving needs are being met.