Need to know:
- Employers should consider offering financial education to all employees and workers regardless of the length of their contract or employment status.
- They should communicate clearly what financial wellbeing benefits are on offer.
- Productivity can increase if employees are not worried about their financial health.
The workforce dynamic is evolving, with a job for life no longer being the focus it once was. Weekly rolling contracts, fixed-term contractors, agency staff and temporary workers are increasingly becoming commonplace in the workplace and these types of workers should not be overlooked when it comes to benefits provision.
Looking after the financial wellbeing of all employees and workers, no matter their job status within an organisation, could go a long way to improving stress levels and, in turn, increase productivity. Neyber’s The DNA of financial wellbeing report, published in May 2016, for example, found that 55% of respondents that are facing financial pressures believe it affects their behaviour at work and ability to perform in their job. The report also showed that financial stress and absence costs the UK economy approximately £120.7 billion and 17.5 million hours every year.
Although this research did not focus solely on contract and temporary workers, it highlights that financial stress and absence is a costly problem for employers in the UK, which impacts employees regardless of their contract type.
Perception versus reality
If an employer has not canvassed employee opinion, it may assume that contractors, agency staff and temporary staff are not interested in the same financial benefits that are on offer to permanent employees. Even if the benefits are available to everyone, they may not see the point in communicating these to non-permanent members of the workforce.
Some employees make a conscious decision not to commit to a permanent, full-time role. This could be due to a multitude of reasons; wanting the flexibility and freedom of fewer hours or shorter working years, returning from a career break or family commitments. However, others may find themselves in a situation where they are forced into taking something short term due to circumstances out of their control. Either way, this does not mean they do not need financial education or would not be interested in any financial benefits that are on offer.
Furthermore, from an employee’s perspective there is commonly a presumption that they are not entitled to the same benefits as permanent staff. In reality, this is not always the case: financial education or benefits are on offer, but due to inadequate communication they are not aware of them.
In order to steer these types of workers in the right direction, employers should build relationships and communicate with them, says David Bird, head of proposition development, LifeSight at Willis Towers Watson. “Traditionally, [employers] haven’t thought that this type of worker was their concern,” he says. “[Pensions] auto-enrolment has been changing that and it has been helpful in finding more employees who are needing to come in to the scope of what employers need to do,” he says.
All employees who earn above £10,000 annually and are aged between 22 and the state pension age, are eligible to be automatically enrolled into a pension scheme by their employer, which includes fixed-term contractors, agency workers and temporary staff.
Financial education for different worker types
A short-term, contract-based workforce can be vulnerable and the impact on productivity might outweigh the cost attached to making financial benefits available to all, says Heidi Allan, head of employee wellbeing at Neyber. “It’s important to provide [different workers] with options, especially those who are on fixed-term contracts or zero-hour contracts where [individuals have] a vulnerability because of their flexible finances,” she explains. “The inconsistency of their finances each month makes it quite difficult to budget. This cross section of the working population is actually more vulnerable than full-time or fixed-term contract staff. Employees need to understand the importance of the decisions they make and the future financial impact it may have on them; employers can go a long way to helping them.”
The shape of the modern workplace is changing towards an agile workforce so things need to change, adds Tali Shlomo, HR director at the Chartered Insurance Institute: “[Employers] sometimes need to look at [all employees] through a different lens.”
Giving workers the tools to help them budget and manage their day-to-day expenditure and overall credit score rating can go a long way towards helping them in the future says Allan. “Building their knowledge so they know what affects their credit score can have a really positive impact on an employee’s future actions,” she says. “It can make a really big difference.”
Different worker demographics can have different financial shortfalls
Without adequate financial education, workers may not be aware how much they realistically need in order to retire comfortably, or what savings they need if they suddenly find themselves out of work. They also may not be aware of any sick pay or holiday pay they are entitled to.
The Chartered Institute of Personnel and Development’s (CIPD) Employee financial wellbeing: why it’s important research published in January 2017, found that only half of working-age people are paying into a pension or have a previous pension. Auto-enrolment will go a long way towards changing this, however, contractors and temporary workers who fall under the contribution threshold, or move from one job to another frequently can suffer a massive financial impact.
Some employees might be missing out on a workplace pension because they work part time and are not hitting the threshold with just one job, says Sophie Ballard, senior manager at State Street Global Advisers. “They may be hitting the pension threshold with a number of jobs and because of this are in dire need of financial advice,” she explains. “I think that it is something that employers need to look at because, fundamentally, people are going to realise too late that they are not going to have enough to retire on.
“It’s not only part-time and flexible workers facing this problem; employees returning from career breaks can potentially miss out on savings too.”
The aforementioned CIPD research found that only 28% of working-age people have savings equal to three months’ income in case of unexpected expenditure, illness or job loss.
But it is not all about pensions and savings: workers on weekly rolling-contracts, fixed-term contractors, agency staff and temporary workers are eligible for holiday pay but they may not be fully aware of their entitlement, particularly if they are new to this type of working arrangement. Agency workers also receive the same terms and conditions as permanent workers after 12 weeks’ continuous employment.
Communication is key
If an employer offers a financial benefits strategy for its workforce, it should ensure that workers are aware what is available. It should communicate this to all of its employees in a way that they can relate to, says Allan. “The key is making sure [employees]understand the importance of decisions they make and recognise that it’s [their] responsibility,” she explains. “Although employers can provide benefits, it’s up to the employee to say ‘Where am I in my situation. What’s relevant?’ The employee needs to know what’s available to them and take responsibility.”
Segregating staff by employment status could result in workers missing out on particular information or training.“The danger with putting our workforce into pockets is that we will miss one over another,” says Shlomo. “An employer needs to ensure everyone is invited and included. It’s a personal choice whether [to] attend a workshop, attend a one-to-one [session], or read the information on the intranet. Just share a lot of information in different ways to make sure everyone is aware as to what’s on offer.”
However, if employers communicate to all employees in a generic way, it can have downsides: it needs to understand its workforce and not assume one form of communication fits all. “There’s no point sending [an employee] an email about a workshop on a Wednesday when they only work Mondays,” says Allen. “Finding the right way of communicating is really important especially if there is an action that needs to take place within a certain time frame. [An employer] should look at the different segments of its workforce and think of what will work for those different demographics and tailor it to their individual needs.”
Looking to the future
In today’s society, it is important that employers encourage their staff to look after themselves, says Bird. “It’s a mistake to say it’s always in terms of pensions; access to good ways of saving generally such as Lisas [lifetime individual savings accounts] are a good thing, making it more accessible for people to save because of the tax relief,” he says. “It’s so easy to put pensions in a workforce but if [individuals] are not in a traditional workforce, that’s not much use. Financial education is key.”
Economic changes as well as individuals’ life choices, have seen a dramatic change in the way we work. However, the fundamentals of how we live has not changed. People still face the same financial challenges of getting onto the property ladder, debt management and saving for retirement. While the government is trying to tackle the changes in the workplace with its January 2018 response to The Taylor review of modern working practice, to ensure a fair working environment by enforcing employers to treat gig economy workers the same as other types of employees, making holiday and sick pay obligatory and considering a higher minimum wage for zero-hours workers, among other measures, financial security is still a concern for many workers.