Unless you’re lucky enough to spend your winters somewhere warm, January is often a tough month for UK workers. The sun rises late and sets early, consigning some employees’ commutes to darkness while they spend the daylight hours indoors. Add to this a harsh return to reality after the bustle, excitement, and leisure of the Christmas period, and it’s no wonder many Brits feel the January blues as we advance into the new year.
Unfortunately, the UK’s cost-of-living crisis has caused recent January blues to hit even harder. Generous gift-giving over the festive season means it’s normal for workers to tighten their purse strings through the following months. But the crisis’ price hikes on many essential goods, without a corresponding wage increase, have led to a fall in real incomes and blown even bigger holes in households’ January budgets.
The Financial Conduct Authority, which regulates the country’s financial services, says that 11 million adults in the UK now struggle to pay their bills—a rise of 3.1 million compared to 2022. And with 1 in 3 Britons making resolutions to save money this year, it’s clear that finances – at least in January – are top of the employee agenda.
The cost-of-living crisis and high interest rates are set to rumble on until at least later this year. So, employers have a huge role to play in helping staff to safely manage their money. Let’s explore the direct links between financial health and mental wellbeing—and its direct impact on workforce happiness, retention, and productivity.
Paying your workforce promptly and correctly
It sounds obvious, but it cannot be underestimated; the foundation of employee financial wellbeing is making sure they get paid correctly, and on time. Wage-related mistakes, particularly in January, can cause significant employee stress, lasting reputational damage, and even risk hefty regulatory penalties. And these mistakes are more common than you think. In fact, almost half (47%) of all UK employees have been affected by errors in their wage slips.
Payroll can be a thankless task for employers. Employees don’t worry about how it happens as long as it’s done correctly, but very much do care when it goes wrong. So, it’s important to make payroll as accurate and streamlined as possible. Often behind any errors or oversights are outdated processes like spreadsheets or even manual paperwork. As a result, more organisations are moving their payroll operations to unified software and the cloud. A well-integrated, single platform that handles all important HR functions like payroll and employee benefits helps to save time, remove the risk of human errors, and protect workforce wellbeing.
Payroll accuracy has become particularly crucial this January with the UK’s new national insurance cut. As the main rate of contributions paid by employees is lowered to 10%, changes need to be applied with care and tested to ensure the right results are produced into payroll moving forward. It’s unusual for mid-year changes around UK payroll to come into force outside the end/start of the financial year in March/April. But as ever, employers are responsible for processing the correct deductions and could be liable for any erroneous calculations or missed contributions.
Equipping your employees with the tools to manage their finances
As we know, financial health has an explicit impact on mental health. Worrying about job security, bill payments, and the ability to afford both necessities and non-essentials can consume an employee’s headspace, leaving them struggling to concentrate or be productive at work.
Again, the issue seems to have been exacerbated by the cost-of-living crisis. Research by the charity Mind shows that the mental health of almost half (48%) of the people in England and Wales has been negatively affected by the financial impact of the crisis. This rises to nearly three-quarters (73%) for those with existing mental health problems.
Employers need to meet their duty of care and ensure people feel healthy and happy enough to give their all every day. Providing sufficient financial tools and knowledge to their teams is therefore non-negotiable.
Fortunately, some HR platforms now feature personalised support to help workers better understand, navigate, and improve their financial wellness. The software lets them generate a financial profile and build an individual plan across six key areas (income, savings, retirement, risk, tax, and estates). Then, they can consult with licensed investment advisors for guidance on everything from retirement plan selections to personal finance and debt management. Employees who use these apps often feel more confident about their finances, enjoying the freedom to make the most of other benefits and an improved quality of life.
Giving your team a greater sense of control
HR software also makes it easier for employers to offer alternative, flexible payment models such as Earned Wage Access (EWA). A large cause of poor financial wellbeing is the lack of ‘power’ that many employees feel over their income. Factors out of their control, such as the cost-of-living crisis, can have a big impact on their wages, and they often have to wait as long as a month to receive their salary when they may need a cash injection earlier – again, January blues rise.
EWA gives employees the choice to access some of their wages before their traditional payday or even as soon as they earn them, via a simple smartphone app. For workers who get paid earlier than usual in December, EWA offers a useful way to navigate a cash-strapped January. It’s no surprise that in the US, where the EWA has already gained traction, almost three-quarters (72%) of employees want access to their wages before payday, and more than half (57%) would work harder and stay longer at a company that offers on-demand pay.
The model is fast growing in popularity in Britain, too – and is something we’re looking to roll out on our platform in the future. Nest Insight’s 2023 Bridging Financial Gaps for Workers report found that one in 10 UK employers now offer EWA to employees, benefiting more than 4 million workers across the country. And in September 2023, the CIPP launched an EWA Code of Practice to help standardise the scheme and ensure employers provide a high-standard offering.
With these safety nets now in place, businesses and workers can feel more confident than ever about bypassing traditional paydays. After all, January blues has been a long-suffered affliction, and is only getting worse. Something urgently needs to change. But by modernising our pay processes, models, and technologies, we can all give employees a much-needed boost for the best possible start to the year, and lower January blues as much as we can.
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