Financial education can help all staff, from junior employees to top managers, but the key to a successful programme is understanding people’s diverse needs, says Victoria Furness
Personal finance isn’t a topic that causes most people to jump with enthusiasm, but a growing band of employers are using financial education in the workplace to engage staff with other benefits on offer, such as share schemes and pensions, and to show employees that they care about their financial wellbeing.
Firms are realising that employees who are less stressed about their personal finances are more likely to be able to concentrate on the job at hand. And offering financial education to employees – on topics ranging from how a company’s pension scheme works to what a fixed-rate mortgage is – can help firms reduce staff turnover.
Nina Crossen, HR project manager at British American Tobacco explains why the company provides a financial education programme: “From a paternalistic point of view, we’re showing we’re committed to helping employees plan for a secure financial future.”
The government also considers financial education to be important, so much so, that it has announced plans for a national generic financial advice service, the details of which are due to be unveiled later this year. Ed Balls, economic secretary to the Treasury, explained the need for individuals to receive more advice at the Financial Capability Conference last year. “The market is becoming more complex and difficult to navigate – the degree of choice can be overwhelming.”
A cynic might add that financial education also absolves an employer of any blame and protects them from any negative backlash should an employee’s benefit choices have unexpectedly bad consequences. Jonathan Watts-Lay, a director at JP Morgan Invest, says that he recently advised an organisation after it had failed to give staff enough financial education before a share scheme matured and some emloyees had found that they had to pay tax on their gains which they hadn’t anticipated and could have avoided. “Employees ended up paying tax as the gain had been so good and there was quite a bit of backlash. They could have avoided that tax if they [had] understood what they needed to do with their investment,” he says.
Financial education can also help engage staff with other benefits on offer. Watts-Lay explains how he helped put such a programme in place last year for a company which was concerned its employees were not contributing enough to the pension scheme.
“We put together a tailored programme and 24% of people involved in the programme increased contributions. What was interesting was that one of the reasons given for why people don’t contribute more is affordability, but of the 24% that increased contributions, 84% went to maximum match.”
But just offering financial education seminars and programmmes is not enough. If staff are to attend them and take on board what is said then the content must be presented in an engaging way and address the needs of each group of employees.
A seminar on managing debt, for example, is far more likely to appeal to a young graduate than an employee planning for retirement and, providing the sessions are open to everyone, this will not be seen as discriminatory to particular age groups.
It is certainly important to take the diversity of the workforce into account and to target the financial education given accordingly. At bus and rail company First Group, for example, 30% of its London workforce do not speak English as their first language. This means financial education materials have to be translated into a number of different languages to ensure they are understood.
The location of employees should also be considered when it comes to selecting communication methods.
An intranet is a often a popular choice for disseminating information. At First Group, however, only 8,000 of its 40,000 UK employees have access to a computer at work so the company distributes financial education and benefits information through its network of employee learning centres and holds evening presentations to fit around workers’ shifts.
Employers should also keep their audience firmly in mind. First Group, for example, never refers to wealth generation when talking about its share schemes. John Chilman, head of reward at First Group explains: “When you’re earning £15,000 basic salary you’re not considering wealth but [on] getting by today.”
Damian Stancombe, head of employee benefits at Punter Southall, adds: “When we do presentations, we don’t just spout a series of facts, but think about how it fits in with people’s circumstances.”
The content of a programme will also clearly affect how useful and engaging it is for employees. The Financial Services Authority (FSA), for example, offers free financial education seminars to employees in the workplace, which some critics have lambasted for being too basic. The content touches on issues such as ‘what is an annual percentage rate (APR)?’ Jim Dredge, workplace programme director at the FSA, however, claims that 90% of attendees believe the content is pitched at the right level.
Angus Jones, managing director of Clarity, a firm of fee-based independent financial advisers, believes specific financial advice is far more engaging for employees than general financial education. “Education is the warm-up act and advice is the value. If I keep coming up with an issue, surely a solution should be in place to answer it?” However, employers should note that unless they are certified to give financial advice, the job should be done by an FSA-regulated adviser.
One thing all experts agree on is that merely providing written financial information is the least engaging option, whether this is a pensions brochure or an information guide for new recruits. Seminars, where employees can be actively involved, can help to present financial information in a much more engaging and interactive way. Ultimately, staff who take on board the content may end up thanking their employers.
Case study: British American Tobacco’s
Maturing employee share options under British American Tobacco’s (BAT) sharesave scheme provided the impetus for its HR team to improve financial education for its employees.
Nina Crossen, HR project manager at BAT, says: “Because the share price had increased enormously there was good profit to be gained by employees and this meant more employees than we originally thought would be subject to capital gains tax.”
The success of the company’s targeted approach – sending invitations to relevant employees asking if they would like to attend a presentation on how to make the most of their profits – led BAT to then implement a more comprehensive financial education programme for staff. This covers broad financial issues, but BAT targets employees by age group. “If you make something relevant to an individual and relate to something on their mind they’re more likely to participate,” adds Crossen. “We feel our financial education programme helps employees fully understand the value of their benefits.”