To mark Mental Health Awareness Week, we had a chat with Chieu Cao, Founder & CEO at Mintago, to discuss the importance of financial wellbeing and why employers should be interested in providing their employees with access to educational financial tools.
PayFit interviewer: Why has financial wellbeing become such an important issue over the last 12-15 months?
Chieu Cao: The pandemic has brought unexpected financial challenges over the past year, changing the lives of millions of people across the UK. Many companies have closed indefinitely which has all added to the general sense of uncertainty felt by the general public. Companies fortunate enough to ride out the storm found themselves having to reduce their budgets and cut spending to minimise the impact of the pandemic.
Obviously, these unexpected changes have contributed to the rise in financial worries and, therefore, the need to take proactive measures to safeguard employees' wellbeing.
In fact, in its latest survey, the CIPD (Chartered Institute of Personnel and Development) found that 12% of employers have introduced, or plan to introduce, a financial wellbeing policy in response to the global pandemic, while 24% have explored how the pandemic has impacted their employees' financial wellbeing to be able to better identify the proper support.
During times of difficulty, it's essential to be able to direct employees towards the right financial advice.
PI: You talk about company struggles; what impact did the global pandemic actually have on a business’s finances?
CC: The impact of the pandemic on a business's finances has been immense.
According to a recent McKinsey online survey, today, 80% of UK SMEs say their revenues are declining, which, when you think about it, is a huge number of companies.
Several related effects have also been reported – 24% are concerned about their ability to retain employees, 28% expect to reduce headcount in the aftermath of the pandemic, and 36% are looking to postpone growth projects.
What should surprise us is that this survey claims that 50% of UK SMEs either already have or are planning to take advantage of the government's furlough scheme. This figure increases to more than 75% for businesses with more than ten employees. Moreover, organisations that were financially hit by the pandemic were most likely to spend less on employee benefits.
It is crucial to understand that this situation has been detrimental to businesses and has also directly affected employees. It has started a vicious cycle which we must course-correct.
The most obvious is the employment changes. Many employees have either been left unemployed or been furloughed and the concerns about their future employment have had a significant impact on their mental wellbeing.
PI: So, is financial stress a root cause?
CC: Yes, it is.
Financial stress is a mutual experience for employees—regardless of the level of income. Financial health is, in fact, crucial for someone's ability to feel safe and secure. After all, three in five employees feel affected by financial stress. Money worries worsen mental health and, as a result, poor mental health makes money management harder.
These concerns impact performance and productivity at work, with employers losing around 2.5 days per employee per year due to financial stress-related absences. All this adds up and it is estimated that UK employers lose approximately £15.2 billion each year because of employees' poor financial wellbeing.
To give you a deeper understanding of the impact of financial stress on mental health, research carried out by My Online Therapy found that 71% of respondents admitted to being worried about not having enough money to pay for rent, mortgage and utility bills as a result of the pandemic.
Even more concerning is that 67% of those surveyed said they were worried about not having enough money to purchase bare essentials such as food and clothing. Not only this, but financial worries can also strain relationships, creating an even more profound sense of insecurity.
PI: Those are some remarkable figures. How is Mintago able to help both employers and employees? What is the vision and focus of Mintago?
CC: We provide educational financial tools to help employees take control and ultimately reshape their relationship with money. We also advise and support businesses on the ways to save on National Insurance costs and optimise their pensions.
Our platform optimises the way pension schemes are structured and provides services that incentivise employees to boost contributions.
It is estimated that 95% of millennials are underfunding their pension. This is not only bad for their long term financial security but can also cost employers business savings. In fact, at Mintago, we believe that unoptimised pensions could be costing employers around £500 per employee per year.
The beauty of encouraging employees to contribute more through programmes like salary sacrifice is that employers and employees become more tax-efficient and save hundreds of pounds a month. Moreover, Mintago works with best-in-class partners and employers' existing benefit providers to craft rewarding, improvement-orientated financial journeys that help employees achieve their goals. Whether it's pensions, mortgages, or clearing debt, the holistic nature of Mintago means employees won't fall through the cracks.
PI: In your opinion, do employers have a responsibility in supporting employees’ financial wellbeing and why should an employer be interested in such educational tools?
CC: Of course they do, and it's also in their own best interest to support employees. The main reasons being employee retention, worker satisfaction, stress reduction and, as you might imagine, cost.
Helping employees to build financial resilience is critical for employers today. Employers are in a position to be able to help their employees save, and therefore it is vital they understand the importance of giving that helping hand.
Financial literacy means more money for the employee but also more productivity and savings for the employer. It does not surprise me that one in four UK workers reported to the CIPD that money worries have affected their ability to do their job. Financial wellbeing is about the control that employees feel they have over their finances. Offering a good pension scheme is one of the many ways an employer can support its employees.
PI: In an individual’s financial health, what role does a pension play in their overall financial wellbeing?
CC: If you think about it, a pension is the largest, most valuable asset an individual can own. With an increasingly younger workforce, it can be challenging to engage them with a topic that seems so distant and far away.
Pensions aren't tangible until someone retires; however, it can provide peace of mind knowing that no matter what situation someone is living in, they still have money set aside for the future.
The principle of starting early reigns true when it comes to investing in a pension. Through the beauty of compound interest, an individual will earn interest on any initial investment, as well as all subsequently generated interest. The financial security that someone can get by investing in their pension is invaluable.
PI: Why is financial education also seen as a benefit beyond an individual’s time in a company?
CC: With individuals being more aware of financial and mental health concerns, workplace benefits are becoming more critical, especially post-pandemic.
Research suggests that around 15% of people in the UK have no savings, while one in three people has less than £1,500 put away. So if an employer is offering financial education, the advice will still be valuable even beyond the time an individual spends with that company.
It does not surprise me that companies providing such benefits are more attractive to a broader talent pool. As businesses have had to adapt their strategies to the ongoing pandemic, it is also expected that employee benefit policies will change.
PI: Finally, what do you think will be the long-term benefit?
CC: The pandemic is shining a light on the effect of money worries on our mental health. This is definitely kick-starting a more progressive shift to our collective attitude towards the importance of financial wellbeing.
Employers are being urged to embrace financial wellness as a non-negotiable among company wellbeing initiatives. By developing a financial wellbeing plan for their workforce, employers have an opportunity to make employees happier and more productive.
Benefits such as these will be invaluable as we move forward from these unprecedented times. The financial wellness space is an exciting place to be at the moment, and technologies such as Mintago are driving the movement to provide employers with the tools to help employees feel happy and confident about money.
Mintago is an unbiased financial platform that helps employers save on the bottom line pensions tax bill while helping employees build a bigger pension without hurting their take-home pay.
Mintago handles all of the admin, including ongoing compliance, re-enrollment, contribution communications, and payroll updates.
Every employee gets their own lifetime Mintago account to track their pension pots, manage contributions, and get expert help from our team.
Mintago is a win-win for employers and employees who want to pay less and keep more.