With the Financial Conduct Authority reporting that 4.1 million people in the UK are in serious financial difficulty, money management is a growing issue and seems to be getting worse year upon year. According to The Money Charity personal debt rose to £1663 billion in February 2019, an increase of almost £1000 per UK adult since the same time the previous year.
Talk Money Week is an annual celebration of the work of thousands of organisations aiming to improve money management in the UK. Beginning on the 12th November, the aim is to encourage organisations and individuals to talk about money and share ways of changing habits in order to save money and make smarter financial decisions.
Causes of poor money management
Before we look at what poor money management means for businesses and their employees, we need to understand why money management is a problem in the first place.
Payment by plastic is on the rise whilst payment by cash is falling. UK Finance reported that in 2006, 62% of all UK transactions were paid for using cash. A decade later the figure had dropped to 40% and the estimated figure for 2026 is even lower once again at 21%.
Tapping a piece of plastic on a card reader registers less in our subconscious than physically handing over cash, making it easy to overspend using credit and debit cards which can create problems alarmingly quickly. Or is it simply that people aren’t budgeting? Failure to track how much you earn, save and spend makes managing your finances a guessing game. Unless you are 100% sure of how much you can set aside to spend, overspending is worryingly easy to do.
Poor money management effects employee wellbeing and productivity
The University of Southampton’s School of Psychology found that people in debt are three times more likely to suffer from some sort of mental health problem than those who aren’t. If employees have money problems weighing on their mind when they are at work they will be less engaged with the tasks at hand. Increased stress and a lack of focus reduces both productivity and efficiency which can eat into the profit of any business.
Absenteeism is of course damaging to businesses, however presenteeism can be just as bad. Employees with money problems often overwork, whether working through illness or overtime in order to make ends meet. Overworked or unhealthy employees can be just as harmful to productivity as absent ones as the quality of work drops when employees become fatigued from continuous long hours without a good work-life balance.
Supporting employees’ money management
With money management having such a significant impact on employee wellbeing, it is wise for employers to find out how they can support their employees in this area.
Financial wellbeing assistance programmes may not provide the immediate financial relief of a wage increase but they do help employees make smarter financial decisions in the future reducing the risk of continued poor money management. Implementing programmes like this also signals to the outside world that the business is a caring employer, which can improve employee engagement as well as talent attraction.
Reviewing the way your company reimburses employees for business related expenditure may also be beneficial, for example, providing corporate credit cards rather than employees needing to submit expenses forms retrospectively.
If there is the available budget there are plenty of ideas that will have a direct financial cost to the business like providing travel season tickets or free parking, however there are plenty of other schemes which will cost your business nothing but time such as negotiating employee discount schemes with local businesses or partnering with a local Credit Union to offer employee loans.
Of course, positive money management is only a small part of good mental and physical wellbeing, however the effects of poor money management are extensive to both employees and employers.
To find out more about how your business can support employees with their money management or to discuss other HR strategies your business can implement to keep your workplace happy please contact one of our Employment Law Consultants on 0161 603 2156 to see how we can help.