Reward is far more than simple remuneration. It’s an expression of appreciation for employees. It acknowledges individual contribution and shows awareness of individual motivation. And – through that – Reward encourages employees to invest their best in the organisation.
An invested workforce puts in more effort, boosting productivity and enhancing brand reputation, supporting both talent attraction and retention. That’s the lure of Reward. So, why are many organisations not seeing the benefits it promises?
An essential component of effective Reward
The answer boils down to a simple truth. To make Reward effective, you have to get key components right. What you offer. How you offer it. And how well your employees understand what they’re being offered.
This last factor is often overlooked – or wrongly viewed as simply a communication issue. It’s not. The fundamental issue is one of financial literacy. When financial literacy is low, it’s harder for employees to see, appreciate, or fully benefit from the value of their Reward.
The business benefits of increasing employees’ financial literacy
C-suite leader Marc Hommel talked about the link between financial education and financial wellbeing at this year’s Reward ForwardNeovation event. Held in London in February, this gathering saw the industry’s most forward-thinking Reward professionals discuss how to make Reward fit for the future. One consistent answer was that businesses need to invest in financial education for their employees.
Financially literate employees are better equipped to make informed Reward choices, which support them in achieving their short and long-term goals. This enhances their wellbeing, highlighting the value of Reward package on a personal level, and increases the likelihood of the organisation achieving its desired outcome: enabling the employee to excel at work.
This isn’t the only business benefit. Companies that invest in their employees’ financial education see – over the long term – improvements in every task that involves numeracy. From stocktaking to hiring vendors, the effects of this add up. To emphasise the potential value of this, the UK charity National Numeracy estimates that poor numeracy is currently costing the country around £20.2 billion every year.
Why now is the time to invest in employees’ financial education
Right now, alongside the direct business case, there’s also a broader imperative for Reward professionals to focus on financial literacy. With rising living costs putting people under intensifying financial pressures, there are expectations for compensation to match inflation.
For many organisations, those expectations can’t be met, and threatens workforce stability. As McKinsey’s Great Attrition research shows, one of the core reasons that employees leave a workplace is because they feel that leaders don’t care about them.
But by supporting employees to understand their financial choices, and to make the most compassionate monetary decisions with the resources available to them, businesses can demonstrate that they do care. Acting to improve the financial literacy of your workforce is indicative of a supportive workplace culture.
At Neovation, Mark Pemberthy, Benefits Consulting Leader at Buck, spoke directly to the ways in which Reward builds that connection between the individual and the business, through offering meaningful, targeted options and information.
For Mark, one simple way to build financial understanding is to align Reward and benefits to the employee life cycle. By providing choices that are absolutely relevant to employees’ lives – whatever their career or life stage – you stimulate greater interest in Reward, which drives heightened awareness of its value. That interest can be used as a springboard for financial education and discussion.
Achieving this is a two-part process. It starts with identifying the factors that are impacting employees’ lives outside work. To do this effectively means thinking about the different cohorts within your organisation – through the lens of age, gender, and ethnicity – and asking for feedback about what matters to each group. For example:
- Is getting on the property ladder a primary goal?
- Are savings needed for childcare?
- Are retirement prospects a concern, or has it become a new or bigger concern?
Returning to the earlier point about demonstrating care, this thoughtful approach sends a clear message of ‘We see you as an individual. How can we support you to achieve the things that matter to you?’
The second part of the process is to adapt your Reward programmes around this feedback. This demonstrates that you are listening, and builds that all-important two-way dialogue around Reward.
Understanding the long-term consequences of financial choices
This alignment with employee need is more authentic and personalised than the traditional Reward approach. But as Reward becomes more individualised – with organisations offering greater flexibility around Reward choices – it becomes ever-more important for employees to be financially literate. Why? Because the choices they are making have long-term, potentially life-changing, consequences.
Without financial understanding, how can an employee choose whether to make a salary sacrifice to build up shares? How do they assess pension performance, and whether they need to increase their contributions?
If flexibility is offered, but employees don’t fully understand their options, the choices they are being told to make become opaque. Instead of being valued as an opportunity, the seeming wealth of choices can lead to overwhelm and inertia: analysis paralysis in action.
Here again, financial literacy sidesteps these potential pitfalls. It equips employees to understand, engage with, and optimise their opportunities. And that unlocks the true value of Reward: its ability to boost effort, drive productivity, and enhance talent attraction and retention.