Last week Bank of England increased the base rate to 1.75% - the highest in 27 years. New forecasts suggest energy bills could rise even further this winter than previously predicted. One in six households are estimated to be in “serious financial distress” and will be struggling with the increase in costs.

When we consider millions of people trapped in in-work poverty or insecure jobs, this becomes even more concerning. Even before the current cost of living crisis, 1 in 8 workers were affected by in-work poverty. And the UK Insecure Work Index found that approximately 6 million workers are in severely insecure work.

We often discuss the role of the Government in supporting employees, but it is equally important to understand what employers can do to support workers’ financial wellbeing.

The increase in costs is harming millions of employees’ mental health

Financial wellbeing is describes the extent to which a person can meet current and ongoing financial obligations, feel secure in their financial future and make choices. This week, Wagestream published new research on the state of financial wellbeing during the cost of living crisis. The research findings are concerning.

The State of Financial Wellbeing report found that daily money worries are affecting greater numbers of employees than before. This is unsurprising given that nearly all workers they surveyed have seen their costs rise, and now 70% say they worry more about money than they did in November 2021. Moreover, one in five (20%) workers who took part in the research said they have increased their use of credit cards and overdrafts to cope with mounting costs.

Financial stress is harmful to our mental health, in some cases triggering feelings of anxiety and panic, or leading to sleep problems. Moreover, financial stress can affect our social life and relationships, leading to feelings of isolation and guilt. If these alone aren’t enough to act to support employees, we also know that financial stress can decrease workplace productivity.

Yet, talking about money in the workplace still remains taboo and half of employers surveyed by CIPD don’t hold a financial wellbeing policy. This could be a reflection of financial wellbeing being perceived as a personal matter by both employers and employees in the past.

The cost of living crisis is making employers more concerned about employees’ financial wellbeing

But with employers fighting to attract and retain workers, and many now struggling to make ends meet, that could be set to change. New research from Wagestream finds that employers have changed their approach to financial wellbeing as a result of the cost of living crisis: Seven in 10 (17%) employers said rising costs have sharpened their focus on the financial wellbeing of their people. Moreover, eight in 10 (81%) employers said they’ve introduced new financial support in the last three months.

While increasing the wages might look like the best way to support employees, it might not be enough in some cases and not all employers will have means to do that. Employers can take various other steps to support workers’ financial wellbeing. These measures can range from pay review processes to introducing one-time bonuses or supporting internal career progression.

Considering the types of support employers are introducing in response to the cost of living crisis, Wagestream research shows that 19% introduced mental health support and 18% increased hours and/or shifts while only 17% introduced employee loans/ flexible pensions/ health cash plan/ pay rises which can be more effective in supporting people experiencing financial hardship.

While recognition of the wellbeing impacts of financial stress is welcome, given the scale of the challenge many workers are confronted with, it is important to choose the right measures at the right time. Practical measures such as direct financial support along with signposting to tailored advice services are likely to achieve the greatest impact over the months ahead.

At this stage it's unclear how many employers will introduce additional support, or whether employer-led measures alone will go far enough. But we see that we will need to see a combination of employer support alongside a comprehensive package of measures from the next Government to address the cost of living crisis.

Disclaimer

The opinions expressed by our bloggers and those providing comments are personal, and may not necessarily reflect the opinions of Lancaster University. Responsibility for the accuracy of any of the information contained within blog posts belongs to the blogger.