The UK’s Mental Health Foundation recently published a report saying that it expects the effects of the cost-of-living crisis on public mental health to be on a scale similar to the Covid-19 pandemic. Over a quarter of employees say that financial concerns affect their ability to do their job, according to research by the Chartered Institute of Personnel & Development (CIPD), and nearly a third say cost-of-living financial worries have negatively affected their productivity.

In addition, the Health and Safety Executive (HSE), reports that stress and poor mental health is the number one cause of work-related ill health in the UK. In 2021/22, 17 million working days were lost due to work-related stress, depression, or anxiety, with the HSE recently warning of a “growing crisis in stress and poor mental health related to work.”

Many employers devoted significant time and resource to supporting their employees’ mental health and wellbeing during the Covid-19 pandemic and may now wish to revisit or adjust those strategies to focus on financial wellbeing.

The rationale for intervention

The business rationale for being pro-active in supporting the mental health and wellbeing of staff is widely recognised. Studies show that workplaces that invest in programs to promote positive mental health amongst their employees will make a return on their investment from lower levels of absence and increased productivity.

Financial problems can often result in poor mental health in the workplace. For example, lost sleep can cause stress and anxiety leading to impaired concentration and decision making at work. Both absence levels and productivity can be affected when employees are worried about their finances. This is not an issue which is limited to lower-paid workers; all employees can suffer money problems.

Notwithstanding the challenging economic outlook and the external factors affecting businesses currently, it remains the case that organizations are likely to be judged on how they behave towards, and support, their employees during the cost-of-living crisis. This includes their culture and ethical stance which forms part of their approach to the ‘social’ pillar of the Environmental, Social and Governance (ESG) agenda.

Other reasons why employers should consider putting in place support are (i) to reduce their exposure to legal and regulatory risk (ii) the time and costs associated with dealing with any complaints or claims and (iii) the reputational issues associated with not meeting the standards expected of their organisation.

Financial wellbeing policy

The CIPD has recently updated its financial wellbeing guide Employee Financial Wellbeing  (the CIPD Guide) which suggests that a workplace financial wellbeing policy should cover three key areas:

• payment of at least a fair and liveable wage;
• support for “in-work” progression; and
• financial wellbeing education and guidance.

Practical tips offered include taking a holistic view engaging with various parts of the organization to support this process as well as linking the policy with other mental health and wellbeing initiatives.

Developing and implementing a financial wellbeing policy will involve a broad range of stakeholders, often starting at the top with a C-suite champion or backing from the board of directors. A recent report by Silvercloud Health, Making Mental Health Top of the Agenda, highlighted that, in its view, the first step in any workplace mental health strategy – which we suggest is linked to a financial wellbeing policy – is to make it a board level priority and ensure there is a senior level role model who is responsible for it, and ultimately accountable.

Financial wellbeing support

In addition to adopting a financial wellbeing policy, employers may wish to review their existing reward strategy to identify what they currently offer and if there are any changes that can be made to further support their workforce, for example:

• increasing or looking at different ways they could structure their overall remuneration package;
• offering hardship loans or season ticket loans or reducing commuting costs by increased working from home;
• putting schemes in place to enable employees to access special discounts;
• offering salary sacrifice arrangements;
• providing information and support such as debt counselling advice through a third party; and
• making introductions to independent financial advisers so employees can receive independent financial planning advice.

In 2022, some organizations offered direct financial support to their staff (typically earning below a certain threshold) through a cost-of-living bonus, although we do not anticipate these will be widely repeated this year.

Management support

Once adopted, any financial wellbeing policy, like other people policies, requires implementation and consistency of approach throughout the organization.  Employers should consider a broad and inclusive strategy, looking beyond specific financial benefits and advice provided by the HR/People team.  The role of managers in supporting the mental health of employees should not be underestimated; managers can play a crucial role in assisting employees who they know are struggling with their finances.

A recent study by Mental Health First Aid England found that approximately 75% of managers surveyed had concerns about their staff because of the cost-of-living crisis.

Managers should also be alert to the signs and symptoms of poor mental health. Whilst these can vary greatly, common signs can be poor performance, loss of commitment, increased absence and reduced social contact, as well as changes in emotional behaviour, either by being withdrawn or tearful.

Support may also include referring employees to appropriately trained mental health champions or mental health first aiders. A private member’s bill was recently introduced with the aim of making mental health first aid an essential requirement of workplace first aid training. Whilst this bill does not currently have government backing, it is does raise the profile of this issue.

Supportive conversations

• Managers should be trained:
  • to have open, supportive and empathetic, but not intrusive, conversations with their direct reports, which includes signposting them to the available support;
  • how to respond if an employee is reluctant to talk about their financial worries or poor mental health and how their wishes should be respected; and
  • reminded that it is not their role to be a counselor or financial adviser.
• Managers should be educated sufficiently to enable them to:
  • signpost internal support, for example, to the company’s mental health champions or mental health first aiders or an individual in the company’s finance or HR team, who can discuss with the employee their remuneration and benefits package and whether there are any changes that could be made to help further support them; and
  • signpost external support, for example, from the company’s Occupational Health provider, employee assistance provider and/or other financial specialist advisers and/or free, confidential and independent money and debt advice.
• Historically, and in some organizations culturally, managers may have been, and may still be, reluctant to discuss personal issues with employees, as they may see it as crossing a line and encroaching into their personal lives. However, in the current climate, many businesses expect managers to be having pro-active conversations with their team to discuss wellbeing matters. Although many employees are encouraged to bring their “whole self” to work, some employees may also be reticent to share information, as they may worry that disclosing financial concerns and/or poor mental health may affect their job prospects.

Managing and seeking to prevent absence

• Supportive conversations are equally important where an employee is absent from the business because of their mental health, including where financial concerns are a factor.  Managers should be encouraged to seek to manage that absence appropriately, including agreeing with the employee the amount of times, and manner in which, the employee will be contacted during their absence, and discuss with them what support or assistance may be helpful during this time.
• Where an employee is returning to work after a long period of absence because of their mental health, it may be appropriate to agree a phased return to work, which may involve adjusting work tasks and objectives as well as changes in hours, to help them re-integrate in a sustainable way.
• In seeking to prevent absence from re-occurring, managers may wish to discuss different options with their reports, for example, whether they wish to make a flexible working request to permanently adjust their working pattern or if the need is temporary, whether a phased return is appropriate.  If the employee is suffering from a stress related condition, they may wish to work with their manager to carry out a stress risk assessment to alleviate some of the causes of stress in the workplace, so far as they are able.

What is the legal position?

There is no general implied duty on an employer to take reasonable care of an employee’s economic wellbeing nor to ensure that employees do not fall into financial hardship. As a result, there is no legal obligation to put in place a financial wellbeing policy.

However, it has been established through case law that in some circumstances relating to pension benefits, an employer may have an implied duty to provide an employee with financial advice relating to the benefits accruing from their employment and, particularly for more junior employees, an employer may become liable if it assumes responsibility for giving financial advice. Employers should be aware that if they do provide financial advice or information to employees about maximising access to rights and contractual benefits (whether or not there is a duty to do so), they should take reasonable care in giving that advice.  

More broadly, a legal duty of care is imposed on employers in relation to their employees’ wellbeing as employers have a common law duty to take reasonable care for the health and safety of their employees in the workplace, which includes their mental health and wellbeing. This encompasses obligations, for example, to carry out risk assessments and to implement the results of the assessment on controlling the risks. 

A legal duty of care is imposed on employers in relation to their employees’ wellbeing as employers have a common law duty to take reasonable care for the health and safety of their employees in the workplace.

Where an employee has a mental health condition, this can amount to a disability for the purpose of the Equality Act 2010, although not all mental health conditions will meet the statutory definition of disability – a mental impairment which has a substantial and long-term effect on the individual’s ability to carry out normal day-to-day activities.

The duty to make reasonable adjustment for employees who are disabled is a wide-ranging duty and can involve changes to the job itself or the individual’s working hours or place of work as well as making adjustments to internal processes. In addition, employers should take care to ensure that they do not discriminate against disabled employees by treating them less favourably or apply a practice or policy which has the effect of disadvantaging those who are disabled.

Where an employee is not disabled but has a mental health or other condition, it may be appropriate for an employer to consider any adjustments suggested by an occupational health physician or GP to help alleviate any disadvantage suffered by the individual, although each case should be considered individually based on the facts available to the employer.

What next?

1. If you do not currently have a financial wellbeing policy, explore whether it may be suitable for your organization.
2. Consider the wide-ranging impact of the cost-of-living crisis on your workforce, including financial and non-financial changes that could be deployed.
3. Develop frameworks and resources for supporting mental health in the workplace, such as mental health first aiders and a mental health employee network.
4. Provide training/education to managers in relation to how they can support employees with both financial and mental health wellbeing.  This training should include both what managers are, and are not, responsible for. Their role is to be supportive and provide information to employees about access to specialist advisers, rather than providing financial advice or offering mental health counselling themselves.
5. Collaborate with external organizations, including money advice services that can support financial wellbeing and mental health and wellbeing support.

Given the scale of the anticipated effect of the cost-of-living crisis on public mental health, it makes good business sense from operational, financial, cultural, and ethical perspectives for organizations to consider the impact of financial concerns on the mental health and wellbeing of their workforce.