CIPD: Improve financial wellbeing for staff hit by pay challenges

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Eight in 10 employees feel that the Covid-19 pandemic has had a negative impact on their employer’s finances, yet almost half of organisations do not have a financial wellbeing programme in place.

According to the CIPD’s latest reward management survey, workers in retail, hospitality, catering, leisure and cleaning were more likely to say their organisation’s finances had suffered.

Only a fifth of respondents said the pandemic had improved finances for their employer, while 11% felt it had no effect.

Unsurprisingly, those organisations that had been hit financially by the pandemic were the least likely to increase pay for employees during 2020, and were also less likely to be planning a pay rise this year.

Only 19% of employers that reported a ‘very negative’ financial impact were able to give employees a pay rise, while 50% of those who reported a ‘very positive’ impact gave everyone a pay increase.

Large organisations were more likely to report a ‘very negative’ picture (37%) versus small and medium-sized organisations (26%). Manufacturing and production businesses were most likely to have reported a financially healthy year (15%).

In 2020, 41% of organisations deferred a pay increase decision for all staff, with a further 23% doing so for at least some staff (depending on factors such as whether they were on furlough or covered by the National Minimum Wage).

In October 2020, when the research was carried out, almost three-quarters felt it was too early to make decisions on pay. That said, 53% said a rise in pay would be applied to some employees in 2021, and only 15% said pay would increase for all employees.

Only 13% of organisations said they would compensate employees for having made cuts during the pandemic, and the majority of those that said this would be the case would do so in the form of offering employee development.

Employers in the retail, hospitality, catering, leisure and cleaning sectors felt that their employees’ financial wellbeing had been hit hard by the crisis, with 28% reporting a decline.

In some sectors, including legal, financial, technology and professional services, employees’ financial wellbeing had improved, thanks to savings on usual working costs such as commuting as most employees were working from home.

A third of organisations in the voluntary sector said financial wellbeing remained unchanged, reflecting a large proportion of workers in this sector on furlough.

However, more than half of employers said they had not collected data on employees’ feelings about their finances, nor did they have plans to do so. Employers in the public sector were most likely to have asked employees about their financial wellbeing (48%).

Almost half (49%) have no financial wellbeing policy or budget for this, the CIPD found. This was most likely in the private sector, where 57% of organisations had no plans to invest in this. A fifth suggested this was because they “don’t trust that a policy would improve their organisation’s performance”.

Where organisations had introduced support for employees’ financial wellbeing, the CIPD found that:

54% have introduced, or have plans to introduce, financial support for those self isolating or shielding
45% are alerting employees to financial scams
18% now have a financial allowance for those staff working from home
11% have brought in early pay access (or salary advance schemes).

The CIPD’s advice on improving financial wellbeing urges employers to “get the board on board” about discussing the financial health of employees and for them to be more transparent about the financial situation facing the organisation.

It advises teams to integrate financial wellbeing schemes into wider wellbeing programmes, saying: “Focusing on employee financial wellbeing while ignoring other causes of work stress is only going to give you part of the overall picture.”

At a policy level, employers should look into becoming accredited Living Wage employers, offer benefits that help employees to get the best out of their monthly salaries, ensure reward is fair and provide development opportunities for those on lower salaries.

The report adds: “However, it’s important to recognise that, while employers do play an important role in employee financial wellbeing, they can’t resolve all the challenges on their own.

“Employers might be able to improve pay prospects for low earners, but they’re less able to influence their living costs, such as the price of fuel, accommodation and health. The government, the financial services sector and individuals all play an important role in reducing in-work poverty.”

The CIPD’s survey echoes findings from XpertHR’s latest pay awards round-up, which found that pay awards had dipped to their lowest level since last summer.