Zurich, 18 May 2020 – According to a survey by Willis Towers Watson, four out of ten employees live from paycheck to paycheck, and many regularly overspend their budget. This is a challenge for employees and employers alike, as the long-term consequences of limited financial well-being affect health, performance and retirement savings. With the current developing situation regarding Covid-19, these results are even more relevant. We expect that the financial situation for employees will deteriorate further as the impact of Covid-19 on the economy reaches these employees.
“The fact that four out of ten employees do not have enough savings to cover the expenses for more than a month is a frightening picture”
Adam Casey,
Director Willis Towers Watson, Switzerland.
Four out of ten - Only so few Swiss employees have their expenses well under control and do not have to live from paycheck to paycheck thanks to their savings. Another two out of ten employees have savings but have difficulty controlling their expenses. The remaining four live from paycheck to paycheck. "The fact that four out of ten employees do not have enough savings to cover the expenses for more than a month is a frightening picture," sums up Adam Casey, director at Willis Towers Watson in Zurich. "People of Generation Y, recently divorced or sick people are particularly affected," explains Adam Casey. As the latest Global Benefits Attitudes Study by Willis Towers Watson also shows, these figures are similarly high in the USA or the United Kingdom.
Image: Employees and their financial situation
- Green:
Four out of ten employees have their expenses well under control and have savings. They do not live from paycheck to paycheck.
- Blue:
Two out of ten have savings, but have difficulty controlling their spending. They do not live from paycheck to paycheck.
- Pink:
Two out of ten can control their spending, but live from paycheck to paycheck.
- Violet:
Two out of ten struggle to control their spending and live from paycheck to paycheck.
Money worries lead to complex consequences
As a result of the financial problems, employees absent due to sickness significantly more often and this has even more consequences for the employer. Around a third of people in the violet category say that they are unable to perform at their best at work due to financial worries and are regularly distracted at work due to money concerns. For people in the blue and pink categories, the proportion is around 12%, and only 5% in the green category. Expressed in figures, this means that the employer loses about 8.6 days of sick leave and 19.7 days due to lack of concentration per year for employees in the violet category. For the other three categories, these values are around 5.0 and 12.5 days. The employer also notices a markedly reduced loyalty among the employees with the greatest concerns (category violet). Even with small pay increases of five to ten percent, more than half of these people would change employers. For the remaining employees, this is less than a third.
Image: Lack of concentration and illness in days
Support in financial planning
But what can the employer do? "Since the employer is directly affected by the financial well-being of his employees, perhaps they should think about supporting the employees. Around 45% of employees want support in the form of a financial tool to help them better control their income and expenses," says Adam Casey, summarizing the employees' needs. Surprisingly, in Switzerland this is desired by all age groups, while abroad it is more the younger age groups.
“Around 45% of employees want support in the form of a financial tool to help them better control their income and expenses.”
Adam Casey,
Director Willis Towers Watson, Switzerland.
According to Willis Towers Watson's Benefit Trends Survey 2019, which asked employers about their priorities in terms of benefits, these needs are being taken into account: Employers are increasingly looking to provide tools to improve the financial situation of employees. External support in the form of counselling, which deals anonymously with employees' concerns and advice, is recommended. Talking to your employer about financial problems is rather unusual and associated with inhibitions. It is therefore all the more important that the employer does not find out which of his employees uses the service.
Variable savings possibilities
Long-term financial difficulties have consequences for employees until retirement. According to the survey, the four groups save only 6% (violet), 7% (pink), 8% (blue) and 10% (green) of their salaries for future retirement. This also includes savings contributions to the pension fund. However, since more than two-thirds of employees have a lack of confidence in the current social security system, they would like to save more for old age. "On average, employees save 8% of their salary for retirement, but ideally would like to increase this to 13%," explains Adam Casey.
60% of those surveyed say that they should save more for old age. This figure is comparable to that of the UK, where it has increased by 13 percentage points since 2013.
It is not surprising that saving for old age is the top priority for people over 50 when it comes to financial issues. What is surprising is that even among one in three younger employees, old-age saving is among the top three financial issues. Many young employees are already thinking about what their retirement benefits will look like. Only one third of all respondents say that their employer provides a satisfactory range of retirement benefits. "Those who offer their employees a choice that corresponds to their individual possibilities position themselves as an attractive employer. Flexible solutions allow employees to vary their savings contributions annually, depending on their financial capabilities," says Adam Casey. In the employer survey mentioned earlier, two-thirds of companies say that satisfying the individual needs of employees is their greatest challenge. They see the main hurdles as regular communication and sufficient explanation of the financial planning options.
The initial effort for this is worthwhile, however, as the satisfaction of the employees can be increased. By providing financial tools and variable savings opportunities, employers can create significant added value for employees and thus minimize the disadvantages for the company resulting from employees' financial worries.
About the Global Benefits Attitudes Survey
The 2019/2020 Global Benefits Attitudes Survey by Willis Towers Watson measured the attitudes of more than 40,000 employees in medium and large private sector companies in 27 countries. Over 750 Swiss employees took part in the survey, which was conducted between July and September 2019. The survey results are divided into four categories: Financial Wellbeing, Benefits Preferences, Dignity, Retirement Expectations and Health & Wellbeing.
