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Financial Education for Employees – Whose Job Is It?

HR websites and magazines have been flooded with articles about a survey by Secondsight stating that over half of UK employers do not provide any financial education to their employees, whereas well over half of employees would appreciate some.

We can’t really blame employers for this deficit up until now. Most employees are adults and are responsible for looking after themselves. Unless the role requires financial literacy, why should the employer assume it is responsible for their financial decision-making?

But think back to your childhood. How many of us actually received any education on financial planning from either parents or school? How many of us left school with any sort of understanding about how we should manage our finances and plan for the future? In what they now call PSHE, children are taught about racial equality and choosing a career path, but very rarely anything on how to survive in the big wide world. According to research, 90% of people still think that when you put money into a bank, it legally remains your money. Just to clarify, it does not!

In fairness to schools and colleges, getting children and young people to focus on the financial future is difficult. They can’t imagine being “old” (anything over about 40!) and think like The Who, they’d rather be dead anyway. For those of us over 40 we know differently. Financial health is important to people, and people are vital to an organisation. Many a time have we been brought in to investigate an employee’s misconduct or stress absences and it has turned out that the root of the problem has been the employee’s mismanagement of his own finances. The employee felt he had to take up a new job on the quiet so was absent from work a lot which may have been avoided with some sensible help on how to plan. Sometimes the employee is like a rabbit in the headlights – frozen with fear and unable to determine how to resolve the problems in which he finds himself. Incredibly he often goes n a spending spree to make himself feel better. A debt and financial advice service, which can often be a very cheap benefit, may be the most useful company service an employee ever uses.

Pensions are the big thing at the moment. Employees are being auto-enrolled into schemes that they may not understand. How can they make the right decisions? It is sometimes the case that a company provides a very good pension or other financial benefit scheme, but that it simply does not explain that to its employees. Competitors may offer lesser schemes, but if they fully explain them to their people, offer education on the broader subject and generally show they want to help their employees take advantage of the schemes, they may well be the winners when it comes to recruitment and retention.

Some employers may have read the Secondsight survey thinking that they’re now expected to provide days of training in financial matters. It need not be like that. An hour is enough to explain most individual issues as and when they arise, and for certain matters the employer may want to provide a free booklet – perhaps on the best ways to organise savings and have a reserve fund. For pensions, a Q&A session may be all that is needed. Bear in mind though that apart from discussing their own schemes, employers cannot give financial advice themselves. They need to use an Independent Financial Adviser if they want to compare external schemes and options. Some IFAs will not charge if they think the sessions will benefit them too, and even those that do may not charge a lot for an hour here and there.

Sensational though the ‘financial education’ headline may have seemed, for most SME employers it is simply a wake-up call to bring in a little education for staff on the important things in life. It’s the sort of thing that reassures employees that their employer cares, and may make the difference between good and bad conduct if an employee runs into financial trouble.

Russell HR Consulting provides expert knowledge in HR solutions, employment law training and HR tools and resources to businesses across the UK.

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