The link between equity compensation and financial wellness

Employees at all levels of your business face financial challenges. To support staff wellbeing effectively, HR teams must tailor strategies to individual needs. Equally, employees should feel empowered to participate in conversations about their financial wellness.

Better financial wellness for staff is about more than the wages they earn, although a fair, liveable wage is a crucial first step. In-work benefits and equity compensation schemes are powerful additions to any responsible employer’s toolkit. 

Why financial wellness starts at work

In 2024, the Chartered Institute of Personnel and Development (CIPD) found that 50% of UK employees were struggling to keep up with their finances, including paying bills and keeping credit commitments. This is up from 39% in 2022.

Unsurprisingly, these financial struggles contribute to mental ill health and stress for staff. And these are leading contributors to absences.

• Short-term absences: According to the CIPD, mental ill health is the third most prevalent cause, with stress in fifth place.
  
  
• Long-term absences: Mental ill health tops the list, and stress ranks fourth.

Financial wellbeing, or lack thereof, can have an impact on short-term absenteeism as well as more long-term retention issues.

Another issue for employers is that staff absences are continuing to rise since the Covid-19 pandemic.

In 2023, 7.8 days were lost per staff member, up from 5.8 in 2020. This is, as CIPD’s Rachel Suff highlights in her introduction to their latest Health and wellbeing at work report, the highest level in a decade.

In short, better financial wellness, which improves the health of your staff, can counter the trend of growing absences and lost productivity.

What contributes to financial security?

To build a culture of empowering financial resilience among your workforce, consider these core pillars: 

Liveable salary

Providing your employees with a fair and liveable wage is the first step to ensuring they are financially secure.

This means that wages need to meet the cost of living. According to the Joseph Rowntree Foundation, this was £28,000 per year for a single person in 2024, and £69,400 for a couple with two children.

Comprehensive benefits

Benefits act as a vital buffer against in-work poverty. A few top options include:

• Housing support: Rent deposit assistance or other subsidies for accommodation.
  
  
• Technology loans: Assistance with IT and telecoms expenses.
  
  
• Childcare solutions: Flexible working, paid time off to care for them, subsidised childcare, and helping employees access the UK Government’s Tax-Free Childcare scheme can also contribute to financial security. 
  
  
• Travel assistance: Helping employees spend less on travel to and from work – travel expenses, company cars, loans for vehicle repairs, etc.
  
  
• Everyday perks: Food, retail, and leisure benefits are becoming increasingly common too.

Equity compensation

Equity compensation, such as EMI, CSOP, and growth shares, aligns employee interests with business growth. Alongside a liveable wage and a diverse benefit offering, employees want to know that their job is secure for the long term.

At a time when being able to divert part of their earnings into savings accounts each month is difficult, and anxiety about being able to save for retirement is at a high, equity can be another contributor to financial security and wellness as your staff think about the years ahead.

Essentially, equity means that employees can own (immediately, or at a point in the future) a small part of the business. They may also be able to receive dividends from those shares. In some cases, having skin in the game can be life-changing. Applied Financial, saw staff members able to pay off their mortgages after participating in an EMI share scheme.

Equity also fosters long-term retention: as share value rises alongside the business, so does the incentive for talented people to stay. With 60% of employees saying they are seeking new opportunities, why not check out our Employee Retention Report, full of considerations of what businesses can do to entice them to stay.

Additional ways to empower staff

Flexibility for your employees in terms of how they are paid gives them more control over how they receive their salary.

This is another positive step towards building a culture of better financial wellness.

• Flexible pay solutions: Early wage access to cover unexpected expenses, or providing the option to convert a portion of their salary into extra holiday days or private health insurance. 
  
  Flexible pay allows staff to tailor how they receive their salary and can help them manage their money more efficiently.
  
  
• Supporting staff through key life events: Assistance in preparation for maternity/paternity leave, home purchase support and other pivotal moments. 
  
  
• Retirement planning: Contributions to pension schemes, access to workshops and one-to-one advice on savings, education on investments and goal setting. 

Five steps to implement your compensation and benefits strategy

1. Seek internal support

Better health of staff and a more positive work culture should engage some stakeholders and garner support.

But a concrete business case for implementing a financial wellness strategy that minimises absences, boosts retention, and improves the bottom line is fundamental to showing the financial value of your strategy to company leaders.

2. Assess employee needs 

HR and management need to be able to spot the signs of mental ill health and stress in staff.

This can be done by gathering data through analysis of the demographics of your staff, or via anonymous employee surveys, to build a comprehensive picture of the financial pain points within your workforce. 

3. Prioritise initiatives 

Use the above data and research to determine the initiatives that are best aligned for your staff.

How easy are they to implement (models and testing are useful here), and what is the most efficient way the full strategy can be rolled out with maximum impact?

4. Implement your strategy and communicate clearly 

Your financial wellness strategy will only be a success if employees know about the initiatives that are available to them.

Engage with staff. And communicate the value of the benefits and compensation available to them.

5. Review and refine 

A financial well-being strategy is not a one-and-done thing.

Evaluate the success of your initiatives regularly and keep communication lines open so the strategy can evolve as your business does.

Setting up comprehensive equity compensation for your team doesn't have to be a headache. Book a chat with one of our expert equity consultants today and discover what this may look like for you and your team. 

Get booked in!