How behavioural insights help HR with employee financial wellbeing

26 February, 2019

Financial wellbeing initiatives give staff more than a better bank balance. Help your employees to gain control of their finances and your organisation will benefit from fresher employees who are enjoying a better lifestyle and less stress.

In an earlier article, we discussed the different ways HR can support employees in taking control of their financial wellbeing. Key to communicating your plans effectively is an understanding of the behaviours that inform people’s financial decision making.

Prepare to gain the behavioural insights that will help you improve the design, marketing and support for your financial wellbeing programmes.

How humans make decisions

Research shows that we make many of our decisions by rules of thumb or shortcuts that are known as heuristics. They help the brain filter multiple factors to make complex choices more easily, including financial decisions.

We explore seven of these mental shortcuts, look at how they apply to financial well-being education and the actions employers should consider taking.

1. The power of pre-set options

People are more likely to follow default or pre-selected options because they tend to ‘go with the flow’. A classic example of leveraging this kind of attitude is pension auto-enrolment.

People know they need to save for their long term financial health yet before auto-enrolment the numbers of workers doing so was low.

Pensions auto-enrolment taps into this attitude by assuming people will go with the flow and relies on inertia to prevent people from exiting the scheme.

What does this mean for HR? If you’ve got a financial scheme that’s in your people’s best interests, you might want to consider offering staff the choice to opt out rather than opt-in.

2. A bird in the hand is worth two in the bush

Known as loss aversion, we humans strongly prefer to avoid loss rather than acquire gains. Framing financial wellbeing decisions in terms of avoiding loss, rather than highlighting gains, can be extremely effective.

Case studies can also be powerful tools to highlight the emotions employees might encounter if they fail to act. Pull on fear and loss to tap into guilt and regret alongside highlighting positive outcomes for maximum impact.

3. Short-termism

This is the tendency to make short-term decisions at the expense of those with a higher payoff in the long term. A good example is spending salary increases rather than saving them.

In the book Nudge Theory, the authors recount a successful experiment with an organisation where employees were asked to commit future pay rises to their pension. The vast majority of people agreed because they knew they needed to save more but the main reason was because there was no short-term impact.

Designing financial wellbeing initiatives that don’t pose any immediate decrease in take-home pay can be very powerful.

4. Fitting in with the in-crowd

As social animals, we’re influenced by what our peers do. Your employees will see recommendations or information from peers as more reliable than advertising or reviews from unknown sources.

You can make the most of this by:

• Leveraging social networks to increase visibility of certain financial wellbeing programmes amongst employees and encouraging feedback
• Using positive role models of desirable behaviours from peer groups
• Sharing the number of individuals taking part in a scheme as a proportion of the target group to reinforce social norms

5. No-one is more interesting than ourselves

Your employees will be attracted by bright, new shiny programmes that seem relevant to them. This means it’s really important to make initial messages as tailored as possible to individual employees’ circumstances.

Ensure written communications are succinct, written in plain English and have a clear call to action to direct people to what they need to do next.

6. Engage with ego

We all project a certain public image and we all want to remain consistent with this image to feel good about ourselves. This can sometimes result in people seeking instant gratification which can undermine long-term savings plans.

Ask your employees to take a long-term view of themselves by focussing on their future self when considering financial planning is a good way to help them make better decisions.

Ensure recommendations are aligned to both your employees’ and organisation’s values so financial wellbeing support fits with what individuals believe to be important. Priorities like supporting family or achieving a healthy work–life balance.

7. Priming the subconscious mind

What you say is important but so is who says it. People are, subconsciously, heavily influenced by who communicates information to them and often have a preference for audio and video advice over text or virtual chat.

If you’re choosing a financial wellbeing provider, look for those whose websites offer tailored rather than generic financial information. And ensure their credentials are presented up front to gain employees’ trust.

Human decision making is complex, particularly when it comes to an important and emotive topic like money. With these behavioural insights, you’re ready to conquer financial wellbeing plan design, communications and marketing. And help your employees make better fiscal decisions to reach a place of financial wellbeing.

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Tuskerdirect Limited is an appointed representative of Howden UK Group Limited (FRN 309639) for insurance mediation activities and Product Partnerships Limited (FRN 626349) for consumer credit activities, which companies are authorised and regulated by the Financial Conduct Authority.


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