The term “in-work poverty” may be a convenient football for politicians. But for employers, the impact of rocketing fuel and food bills on staff mental and physical health is hurting the bottom line.
With the cost of absenteeism and presenteeism due to money worries running at an annual £1.56bn, according to a recent Aegon report, helping staff pay their debts or fix the roof has become a top-level business priority.
For example, Anglian Water launched its Covid Hardship Fund in 2020, funded solely by and for employees. It has already paid for funeral expenses as well as covering unexpected medical and childcare costs. Anglian Water chief executive Peter Simpson made a personal donation of £202,000.
With the knock-on effects of redundancy, furlough and reduced hours continuing to dent household incomes overall, Sally Purbrick, Anglian Water’s head of reward, believes the fund will need to run beyond the next financial year.
In common with others in HR, she’s been surprised at the number of staff needing a financial lifeline – “after all, we pride ourselves on providing a fair salary structure” – and notes that the appeal of loans and advances is by no means restricted to modest earners.
“Whether it’s someone who can no longer afford private education for their children or relationship breakdowns that reveal hidden debts incurred by a partner, as an employer you only ever see one side of someone’s financial life,” she says. “While it’s tempting to assume that it’s solely people on lower salaries or in particular jobs who get into debt, this is clearly not the case.”
The Covid fund comes on top of a financial wellness and education package featuring debt counselling and Employee Assistance Programme (EAP) provision. The business also provides loans to employees with poor credit scores via third party provider Salary Finance.
Like Anglian Water, Yorkshire Building Society is not in a sector associated with low wages and zero-hour contracts. However, the very real and universal stigma around financial hardship is even more pronounced in financial services, says total reward lead Michelle Elsworth.
“Given that we are experts in looking after our customers’ money, colleagues are often incredibly reluctant to admit that they themselves are suffering from financial hardship and loss of financial control,” she says. “We are well aware that whatever salary band you are in, people do over-commit themselves and experience very real distress and ill-health when they are in despair over money.”
A zero-interest financial hardship loan of up to £750 – which must be applied for directly from the company – has already helped more than one YBS employee escape from an emotionally and financially abusive partner and start a new life.
More routine, low-cost loans of an average £7,000 – arranged directly via Salary Finance and repaid at source – have allowed other staff to consolidate borrowings and stay out of the hands of unscrupulous lenders.
In 2017, one of the organisation’s chief officers talked publicly about his own financial problems, a move which Elsworth believes has helped foster a culture of openness.
“Having done so much work on mental and physical health since that time, we sense it is time to turn the spotlight back to the wholly related issue of financial wellness.”
Return to welfare
The term “welfare officer” hasn’t been in vogue for many years, says Charles Cotton, senior adviser for performance and reward at the Chartered Institute of Personnel and Development (CIPD), yet the basic need to keep staff afloat this winter could mark a return to the concept, he believes.
“As providers of income, employers have a key role to play in financial wellbeing and we may well see new titles such as director of people and welfare emerge as more staff find they are unable to put food on the table.”
All organisations, Cotton argues, need to consider the impact of low wage or capped hours policies and consider joining the 7,000 UK businesses that have so far adopted the voluntary real Living Wage.
“Some firms don’t like talking about in-work poverty because they feel some guilt or worry that they will appear intrusive or even paternalistic, but in my view there is a moral obligation to think very hard about such issues, particularly in the current economic environment,” he says.
As the UK’s longest-established provider of financial wellness services to employers, banking group Close Brothers takes a different line.
“I don’t believe there is a moral obligation but we certainly see financial wellness and resilience as a business imperative, particularly given that very well-paid people get into trouble too,” says Jeanette Makings, head of financial education. “Those who fear that their employees may fall prey to ruthless lenders will certainly want to offer loans, but for other clients, it’s more about scaling back gym membership for greater emphasis on ISAs, savings plans and EAP.”
Over at BT, which has provided loans to 13,500 staff since 2018, the urge to help colleagues in debt – whether through gambling, addiction or even maintenance costs – is genuine, says Drew Matthews, director of reward, employee relations, health safety & wellbeing.
“BT is a kind and caring organisation and we want to look after people, but we don’t want a return to either 1970s paternalism or Victorian attitudes to debt management,” he says. “Colleagues are adults so it’s up to them to make choices around their personal finances – the company’s role is to provide the products, tools and education to help them make informed decisions.”
Companies must deal with the basic needs of their people, offering them a decent living and an overall package that’s fair, reasonable and sufficient, he says. “We are determined to do the right thing in difficult circumstances.”
With BT now close to achieving real Living Wage accreditation, he adds: “I do recognise that there is a moral subtext to the current debate around employee hardship and this can be uncomfortable for some employers.”