Millions of employees were thrust into an extremely financially precarious position by the lockdown, and companies faced having to lay off much of their workforce. The government stepped in to help pay for staff salaries where possible, but inevitably a number fell through the cracks and were left unemployed, resulting in a dramatic increase in people applying for welfare benefits. Yet as we move forward from this crisis, there needs to be an urgent conversation around how we better protect workers from a wide range of financial shocks, and the role employers can play in contributing to the financial health of their employees.
In 2012, Demos produced Duty of Care, a report looking at how some employers play a role in the financial wellbeing of their employees, particularly through providing income protection, and the barriers others face that stops them from doing so.
You can read the executive summary below and the full report here.
This paper is looks at the potential role for employers in safeguarding the financial wellbeing of their employees. It looks to ask why some employers choose to facilitate financial protection for those who work for them, what barriers prevent some employers from doing so and what potential benefits could be reaped by employers, employees and, indeed, the state if we were to able to expand the number of workers protected in partnership with the companies they work for.
This paper – which builds on previous Demos research and polling undertaken by GRiD – restates the case for broader take-up of financial protection products by Britain’s workers. If the UK economy were able to improve take-up to the levels seen in the US, income protection alone could help to save the exchequer up to £2.24 billion a year. That represents around a quarter of the future welfare savings demanded by the Chancellor in the 2011 budget. The best route to such long-term savings – and to heightened protection for individuals and families in the ‘squeezed middle’ is employer engagement.1
But at a time when many businesses feel that they are struggling against a negative outlook, it is vitally important to address and explain the potential benefits for employers. This is not about altruism on the part of hard-pressed small and medium businesses.
A more proactive engagement with sickness in the workplace could help to reduce the £24 billion a year that employers currently spend on employee ill health.2 early intervention to rehabilitate and reenable employees suffering from sickness can reduce SSP bills and also reduce staff turnover and recruitment and training costs.3 What is more there are proven benefits – in terms of morale, engagement and employee-loyalty – that stem from provision of financial protection to employees.4
But there are challenges too. Many companies feel that their responsibilities to staff are already burdensome and, in a period of high unemployment and low growth, act as barriers to taking on new employees and growing businesses. Furthermore, the lack of widespread knowledge and understanding of income protection, the need for it and the service it performs means that the benefits seen to US employers (where the market is more developed and knowledge is higher) may not be immediately transferable in the UK context.
This evidence leads us to a number of questions for discussion – which we feel should form the backdrop to any effort to further and better engage employers in a discussion about their potential role in their employees financial wellbeing:
• How great a responsibility should employers have for their employees’ financial health?
Does the responsibility of employers end with those factors directly related to their employees’ work or do employers have a wider role to play in ensuring that their employees are financially healthy and responsible? Are there benefits for employers to a more holistic approach to managing the financial welfare of their employees? To what extent should financial education form part of employers’ engagement with their employees? Should Government support greater group
and individual welfare responsibility through targeted support and incentives – such as NI rebates?
• How can we make income protection viable for SMEs?
Should small businesses be encouraged to pool together in order to provide education and protection for employees across a number of businesses – perhaps through local Chambers of Commerce – in order to ensure that income protection is not reserved for employees of large corporations?
• What can be done to raise demand and facilitate employee engagement in income protection?
A key reason for inaction among employers on income protection is the lack of demand exhibited by employees. This dampens the incentive for promoting financial education in the workplace and facilitating or supporting income protection – it also potentially reduces the benefits available to responsible employers.
• How can we make facilitating group protection products reassuringly straightforward for employers?
The fear of bureaucracy and potential legal liabilities is a deterrent for employers considering income protection for staff. While the degree of this burden is overstated, and much can be done to reassure, it is true that for smaller businesses (without dedicated, in-house HR teams) facilitating income protection may prove difficult. Is there a role for a simple, straightforward, third party platform aimed at employers to aid in facilitating income protection, myth-bust about legal liability and source appropriate products?