The term ‘cost-of-living crisis’ was reportedly first coined a decade ago by Ed Miliband, the then Labour Party leader, in reference to the impact of the coalition government’s austerity measures.

Since 2021, however, it has been used to describe the combination of inflationary price increases and declining real-terms income that has turned the screw on household budgets. For many people across the UK, monthly salaries have been spread increasingly thin on the back of sustained rises in the cost of everything from energy and food to mortgage repayments.

But while it is possible to think about the cost-of-living crisis in purely financial terms, the effects of this situation are undoubtedly being felt at a deeper level by employees across the UK. After two years of pressure, the indirect effects are beginning to become more clear – to employers and employees alike.

Wellbeing linked to worry

In recent research, for example, employers stated that stress caused by financial worries was the primary health and wellbeing issue affecting most generations of their workforce. Employees agreed with this assessment, with Generation X, Millennials and Generation Z all citing money worries as the most common issue troubling them.

This worrying finding underlines how money matters are closely interlinked with our mental and physical health. Financial struggles can lead people to feel stressed or anxious to the point where it can lead to problems with sleep and relationships. There can also be knock-on effects in the workplace in terms of reduced focus and lost productivity.

Together, these factors can contribute to an overall decline in wellbeing. In 2023, as many as three in five UK workers in 2023 reported a worsening of their mental health, with money worries cited as a contributing factor alongside a host of other sources of workplace stress.

Sadly, this situation has the potential to spiral, since people with poor mental health can be prone to neglect their financial responsibilities or make ill-advised spending decisions, only exacerbating their money worries further.

Supporting worker welfare

The overwhelming majority of employers today recognise the role they can play in helping their teams avoid such problems through a focus on financial wellbeing. This increasingly important aspect of worker welfare involves equipping employees with the skills they need to manage their money better, delivering valued support at a difficult time.

Just over half of employers (53%) are expecting to increase their investment in financial wellbeing initiatives in the coming year, while over the next two years, 44% expect to keep a sustained focus on tackling financial distress.

There is no ‘one-size-fits-all’ approach when it comes to financial wellbeing, with the exact nature of the provision likely to vary from company to company. All approaches, however, will share an underlying focus on empowering employees with stronger money management skills, helping ensure they are in a position to support their immediate financial needs while also considering how best to support themselves for the future.

Tools for financial success

Educational programmes can be a valuable way of equipping staff with a better understanding of financial matters. Whether face-to-face or online, these sessions can draw on the expertise of external professionals to provide an authoritative, independent perspective. Content could be tailored according to the mix of knowledge across an organisation, from an overview of fundamental concepts to explanation of more sophisticated strategies.

For example, certain segments of the workforce might benefit from a focus on how to manage debt while others will be interested in savings, investments and working towards specific financial objectives. And while the subject of pensions will be almost universally relevant, younger members of the organisation are likely to have different questions to more experienced colleagues who are heading towards retirement.

Employers can also help their workforce put their knowledge to good use and embed good habits with the support of software tools. A number of mobile apps are available that afford employees instant access to user-friendly financial services, whether in the form of savings trackers or dashboards to provide a visual indication of monthly spending.

There is also potential for employers to facilitate workplace savings schemes where deductions are made directly through payroll. By simplifying the savings process, such schemes can help in overcoming the problem of inertia among employees, which has been shown to be a significant factor behind their failure to deliver on good financial intentions. Indeed, a study at one employer revealed that almost all (98%) workers who felt a workplace savings scheme would be helpful to them had failed to sign up.

Long-term investment

Over the coming years, the majority (74%) of employers say they plan to bring together tactical opportunities such as this into a more holistic approach – an investment that is only likely to be applauded by employees

So, while it might have taken a cost-of-living crisis to push financial wellbeing up the employer agenda, the value it can potentially deliver in the lives of employees means it is likely to remain an important facet of overall employee wellbeing well into the future.

The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Corporate or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.