The Role of Employers in Employee’s Financial Wellness
Angela Vale is an experienced life coach of nearly 20 years with a degree in business transformation. She is an experienced people leader who has spent the last eight years in the financial services sector. She is the former CEO of Footprint Connect, a unique online financial wellness platform.
When I started work at the age of 16 in a little factory in rural Auckland, I recall being told to leave my personal life at the door. These days, thankfully, most employers agree that old way of thinking is outdated and fundamentally flawed. It is now widely understood that our most basic needs (physiological and safety needs) are intrinsically linked to our wellbeing, particularly our financial wellness.
It therefore stands to reason that if we believe our basic needs are not being met, or are in jeopardy, then our fear response can be triggered, and we go into survival mode.
This state of existence is almost primitive; it is likely to dominate our thoughts and behaviours. When we are living in this mindset, observers may notice a lack of being fully present (also known as presenteeism) as we go about our work day – we’re just not ‘with it’, we are tense and distracted, perhaps more prone to mistakes. In this state, emotions can be volatile and our perception of events or situations can be skewed and viewed with a completely different lens than what might otherwise be our norm.
What does this mean for managers and leaders in companies? They can misinterpret these changes in attitude and behaviour as performance issues, which may trigger an approach that perpetuates the very problem they are trying to address.
Issues affecting wellness, financial or otherwise, don’t just affect the person who is struggling; managers, team members, internal and external customers and others in the organisation are also affected, directly or indirectly. And the business itself will experience some or all of these (and more besides):
Increased absenteeism / illness
Reduced morale and productivity (presenteeism)
Declines in customer service quality
Declines in work quality
Decrease in collaboration and teamwork
The cost of even one person in this survival-mode state is significant and whilst we currently lack substantial data in New Zealand, according to Southern Cross Health Insurance Business NZ Workplace Wellness Report, an absent employee has typically cost their employer $600-$1,000 per year since it started capturing this data within its survey. According to a 2020 Forbes report, research by HR specialist SHRM found that 80 percent of employers report that financial stress is lowering their employees’ performance level, at an annual cost of nearly half a trillion dollars. Inarguably, it makes good business sense to incorporate financial wellness into today’s business strategies and support employee benefits programmes.
A lack of financial preparedness perpetuates the circumstances that lead to poor financial wellness. Reserve Bank data shows New Zealanders’ collective household debt climbed to $250 billion in 2020 – an increase on pre-COVID levels – while a 2021 Finder survey of 1,501 New Zealanders aged 18+ found around 41% of Kiwis are carrying credit card debt, owing $3,776 on average. Seventeen percent of respondents cited credit card repayments as their leading cause of financial stress.
Compounding this financial stress is our overall lack of protection against risk; the Reserve Bank’s 2020 overview of life insurance in New Zealand identified that life insurance penetration (the ratio of gross premiums to GDP) and density (gross premiums per capita) are both well below the OECD average.
What’s more, many people don’t have the rainy day funds to cover themselves in the absence of insurance. A series of barometer surveys by the Commission for Financial Capability revealed that only 29 percent of respondents could access three months’ worth of income (the minimum amount money experts say you should have stocked away) in case of an emergency, such as a sudden job loss or significant reduction in income.
It seems to me that the Kiwi ‘she’ll be right’ attitude isn’t getting us financially prepared for when the inevitable tough times hit. This is an attitude we need to change and it’s where employers can really make a difference.
A recognised approach to change is to create awareness, grow knowledge and enable action. Helping to improve employee financial wellness doesn’t have to be simply increasing someone’s pay; it can involve supporting further education by giving access to information, tools and resources that empower through self-driven learning, with guidance for action-based next steps.
This approach can lift confidence which in turn helps with decision-making, leading to better outcomes. It doesn’t stop there; this cycle of change can help with the transference of knowledge through to other family members and into our communities.
The work is being done to support employers to get it right: a longitudinal study of financial literacy by Massey University’s Fin-Ed Centre found plenty of bright spots – very high participation in KiwiSaver (which employers can support), wariness about credit cards, and general confidence in their ability to manage their money – and identified the financial attitudes, behaviour and tools for wellbeing that are increasing levels of literacy in the community.
Crucially, it showed that many young people continue to rely heavily on their parents for financial advice and a “learning by doing” approach instead of traditional financial literacy interventions in formal settings as a source of learning – meaning there is a huge opportunity for employers to fill the gap by offering more fit for purpose education and literacy solutions.
While the evidence is there to support that financial wellness should be a key pillar in all employer wellbeing programmes, I am not suggesting that improving New Zealand’s financial literacy and capability gaps is a simple one. There are a number of recognised challenges for employers including managing a diverse range of needs and expectations, finite budgets, tangible ROI and the view that solutions need to be tailored and individualised. However, having seen some of the impacts that comes with poor resilience, financial or otherwise I do believe we have some low hanging fruit opportunities that employers can play a game changing part in.
