Measuring financial wellbeing: HR’s ultimate guide to success

The link between financial wellbeing and better mental health is well-established, as is the link between better financial wellbeing and productivity at work. But as with all investments, organisations need to be able to establish a baseline and measure progress on an ongoing basis to ensure the ROI is clear.

Financial wellbeing measurement: why do it?

Firstly, you can’t solve financial wellbeing for people: you can provide the tools that empower employees to do it for themselves. If you don’t ask what they want, you’re likely to provide the wrong tools.

Secondly, you won’t know if the tools you buy are making a difference if you don’t measure on an ongoing basis. It may be the right tool but your roll-out plan was wrong, in which case small tweaks may make the difference between success and failure. Unless you measure, you won’t know.

Thirdly, financial wellbeing is not a nice-to-have. It’s an area that effects the entire operation of your business because when people are preoccupied with financial stress, their performance drops dramatically. You measure revenue because it’s correlated with organisation success: why not financial wellbeing?

Measuring financial wellbeing: how to do it?

There are two main methods of measuring financial wellbeing.

The first is asking staff directly using a workplace financial wellbeing survey. This is very important because it normalises the conversation and we’ve only made the strides in mental health at work in recent years because the conversation has been normalised. Financial wellbeing surveys give you direct, actionable data on what employees want, how they’re doing financially and the impact at work. There’s nothing more useful if you want your financial wellbeing strategy to work.

The second is using proxy metrics (many of which you already measure) to validate or weaken insights you get from your survey to drive the most appropriate action. These include retention, absenteeism and pensions contributions. We go into more detail on each one below.

Financial wellbeing survey: direct measurement of financial wellbeing

The easiest way to measure financial wellbeing is to simply ask staff how they are feeling, either through regular, quick and simply pulse surveys, or more detailed requests for staff feedback.

Employers may feel reticent about asking staff about their financial situation, but staff are not as guarded about this as you might think – with most appreciating the approach (if they believe initiatives will follow). In fact, PwC’s 8th annual Employee Financial Wellness Survey found that 78% of employees are more likely to leave their employer for another organisation if that other organisation cares more about their financial wellbeing.

Wagestream has developed our own financial wellbeing survey comprising 17 separate questions validated by behavioural insights experts. It comprises a simple link that can be sent directly to staff, which also aggregates data for you to view.

Questions include everything from how often staff become overdrawn each month and what credit they have outstanding to the extent they lose sleep worrying about money and how much disposable income they have.

Each question has an accompanying baseline drawn from various sources including ONS data, allowing you to quickly benchmark your employees against national averages and get an immediate sense of how they are doing when it comes to various measures of financial wellbeing.

Measuring financial wellbeing with proxy metrics

Financial wellbeing is so wrapped up with personal satisfaction, mental health and performance at work that changes to financial wellbeing are likely to show up in some of the common metrics that organisations measure. This makes them useful, particularly when augmented with direct measurement.

With any proxy measurement, having data that can be interrogated at the organisational level down to cohort level is important, as is historical data so you can look for pertinent deviations over time. This makes certain metrics more attractive than others when it comes to measuring financial wellbeing at work.

Measuring financial wellbeing: what metrics should you use?

• Staff retention data: Retention is great because you probably already measure it and have historical data. Wagestream surveyed our own users and found that 82% felt more positive about their employer as a result of being offered our financial wellbeing platform – considering turnover can be a function of how staff feel about their employment, this suggests staff with access to financial wellbeing benefits that turn the dial can reduce turnover
• Absenteeism: Stress – including financial stress – is correlated with absenteeism, so higher-than-average absenteeism (or absenteeism that is acutely out of whack with your baseline) can indicate acute financial stress or chronic financial stress causing a breaking point. Absenteeism differing from your baseline in specific sub-groups may also point to financial vulnerabilities.
• Presenteeism: Presenteeism is certainly useful in measuring financial wellbeing. Financial stress leads to absence and presenteeism is a form of pathological absence, where employees don’t feel safe to take time off officially. However, presenteeism is notoriously hard to measure and unless your organisation has an established framework or a strong data analysis department you may be better passing on presenteeism in favour of some easier-to-measure indicators.
• Pension contribution data: Changes (such as suspensions/reductions) to pension contributions can be a sign staff are feeling the pinch. In January 2021 ONS data revealed employee contributions fell 11% over the previous year as staff (some on furlough, or others left feeling more precarious) sought to claw back some of their monthly outgoings. Requests for early access to lump sums also jumped 5% during 2020.
• Engagement with financial wellbeing benefits: It may sound obvious, but when staff are actively engaging with specific financial wellbeing benefits (such as debt consolidation or real-time financial coaching), it’s probably because they have a need for it. Overall adoption of these tools is a useful yardstick for how much the benefit is needed. Changes in adoption and engagement levels can also point to a reduction or increase in financial wellbeing
• Engagement with financial wellbeing champions: Increased engagement with financial wellbeing champions can indicate poor financial wellbeing – if you’re confident they are playing their role well. If you’ve selected financial wellbeing champions but haven’t mobilized them effectively, any changes in employee financial wellbeing are less likely to show up through this channel.
• Other measures: Changes to staff wanting cash rather than certain employee benefits can be a sign that employees are not making their regular salary last the month and need support. Other things to watch out for are an increase in staff selling holiday entitlement for cash, suspending participating in salary sacrifice schemes and an increase in the numbers of requests for advances or weekly pay (if you currently operate a monthly locked pay cycle).

Conclusion: data supports all aspects of financial wellbeing strategy

The point of collecting data should be clear: data leads to insight, which leads to strategy (and all the positive outcomes that a good financial wellbeing strategy brings), validation of investment and optimisation over time.

Willis Towers Watson found that 62% of organisations do not have a well-articulated financial wellbeing strategy – which is undoubtedly driven by poorly measuring the financial wellbeing pinch-points staff face in the first place. But when organisations do measure financial wellbeing, solutions that are genuinely beneficial to employees tend to emerge.

It’s important to remember that financial wellbeing does not have an end-point. Employees will always need empowering with tools that put them on the path to better financial health. And in turn, measurement will always be needed to drive effectiveness in your financial wellbeing strategy and implementation of the tools you’re focusing on at that point in time.