The link between financial wellbeing and mental health: what employers need to know

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One of the biggest fears of wellbeing professionals at the moment is that employers will slash wellbeing budgets as we head into a hard winter, amid a cost-of-living crisis and an economic downturn, while still recovering from a global pandemic.

Desperate plea 

Koa Health’s senior wellbeing consultant Beatriz Biosca unleashed a desperate plea on LinkedIn for organisations not to do this, putting forward the argument that cutting wellbeing budgets would be “catastrophic”. She cited the litany of negative factors already facing employees, as well as the clear link between mental health and financial wellbeing:

“Judging from earlier experience of financial crises globally, rising unemployment, poverty and social insecurity, can lead to upward trends in global suicide rates, as well a significant increase in the prevalence of psychiatric illness and substance abuse. Even though the economy can adversely affect mental wellbeing, better mental health can, in turn, majorly contribute to economic growth. So, we could easily argue that, instead of cutting mental wellbeing budgets and benefits to control costs, organisations would hugely benefit from doubling down on these to prevent and further protect their workforce in the short and long term.”

Biosca’s colleague – Dr Tania Johnston, clinical psychologist at Koa Health – further explains the pernicious link between mental health and finances as being a “vicious circle”: “While mental health difficulties can bring on financial difficulties – through stigma, difficulties in securing a job, relationship problems, etc – the latter can also reduce mental wellbeing.”

The power in employers’ hands

As she says, poor financial wellbeing can impact an employee’s “protective factors” guarding against mental ill health, like self esteem and ability to sleep, leading to low mood. This, then, can reduce motivation to keep to healthy habits, like motivation to exercise or socialise which, again, makes the vicious cycle worse.

The good news is (yes, it’s not all gloom and doom) is that employers can play a really positive role in supporting employees through this difficult time. For instance, the research shows that financial worries actually impact mental health more than actual financial variables, such as income or employment status. Employers have the power to assuage these worries by both reassuring employees of job security (if possible) but also through financial education.

Having good financial wellbeing, after all, isn’t necessarily about how much money an individual earns but more about their confidence that they can manage their money effectively; these are skills that can be taught and, indeed, some employers are now offering their employees access to tailored financial coaching to improve their situations and, so, their financial wellbeing too. If they feel they have the skills and resources to weather the financial storm, it is less likely that their mental health will be negatively affected.

As Dr Johnston says, “these issues are deeply linked to people’s sense of agency over their lives, as well as to self-esteem, both key psychological constructs that link financial difficulties to mental health”. Therefore, as well as financial education, she says, “mental health interventions should aim, not only to reduce worries and thought patterns relative to finance, but also promote healthy coping mechanisms”.

Supporting the NHS

The other hugely powerful and benevolent role that employers can play during this economic and mental health crisis is to take some of the strain off the already-breaking NHS. In the wake of the global pandemic, mental health waiting lists are already dangerously long, meaning that many people’s conditions are worsening as they wait for care.

As Jane Austin, HR director at water retailer Wave Utilities, has found, early intervention makes all the difference. Her company operates an early intervention service as part of the Group Income Protection insurance from Metlife. Because it’s expensive for insurance companies to have employees off work sick, Metlife is highly motivated to catch mental health issues early and intervene.

“That means that as soon as we have an employee who is struggling physically or mentally, they get referred through the early intervention scheme. Metlife’s provider Health Assured has a range of triage nurses, including psychiatric nurses and they immediately put a programme in place. We have been able to give staff access to psychiatric nurses months earlier than the NHS would be able to,” she says.

The other learning she’s gleaned, as well as the vital importance of early intervention, is the power of assigning an employee to a named psychiatric nurse who liaises throughout their care. This way the employee quickly builds a close relationship of trust with the care-giver, a factor which is often crucial to the effectiveness of mental health interventions but often not possible via the NHS. Most of the time, says Austin, the employee is able, with support, to stay in work.

Early intervention and reasonable adjustments

The Money and Mental Health Policy Institute “absolutely” believes that employers have an important role to play, according to Senior Research Officer Becca Stacey. Firstly, they need to be paying “at least the living wage” to all employees.

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Secondly, they can signpost employees to valuable resources for support. “The more that employers and managers can create a culture where people can talk openly and frankly about the sort of difficulties people are facing with their mental and financial health, and regularly signpost to support, like debt advice and mental health support, the better,” says Stacey. “Central to that, is ensuring managers have training and knowledge of the link between mental and financial health, and knowledge of what local help is available.”

Thirdly, employers should be supporting employees with existing mental health problems by offering workplace adjustments (for example, flexible hours). “Employers are required to provide reasonable adjustments but we know, from our research with people with mental health problems, that two thirds of those with a mental health problem who have requested these, haven’t had their requests met, or haven’t had them fully met,” she says.

Providing these adjustments can help support more people to manage their mental health and work. As it stands, too many people are having to take time off work, or leave the workplace entirely, because employers aren’t providing adequate support. Refusing to provide this also means other employees are less likely to ask for reasonable adjustments to be made because they’ve heard from colleagues that the company won’t implement them.

But, as Stacey also says, employers need to remember that there may be many employees who are suffering in silence because they don’t feel comfortable talking about their mental health problem. That’s why it’s in employers’ interests to create an open, safe workplace where mental health, and reasonable adjustments, are taken seriously.

“One in four of us at any given time have a mental health problem. And one in two of us will, across the course of our lifetime, so this is going to be affecting a quarter of your workforce,” says Stacey.

There are plenty of other ways, too, that employers can help prevent deterioration of employee wellbeing due to financial worries. For instance, by making changes to contractual sick pay so employees can claim it part-time alongside wages, and therefore temporarily reduce hours and be supported in their transition back to full hours. And having wellbeing action plans in place so line managers can spot signs when people are struggling, and know how to respond to these.

So, while Stacey says the cost of living situation is “pretty terrifying” due to the fact “the economic situation is going to make the cycle between money and mental health more vicious”, she’s also hopeful that much can be done to empower individuals.

“The key message for employers is that no matter who you are, or how small you are as an employer, there are always steps you can take to protect people a bit from the link between money and mental health. There’s always action that can and should be taken.”

The Money and Mental Health Policy Institute’s advice to employers looking to support employees through the cost-of-living crisis:

  • Pay your employees at least the living wage
  • Create a supportive environment where employees feel comfortable disclosing a mental or financial health problem; normalise conversations about mental and financial wellbeing
  • Direct struggling employees to sources of support, such as debt advice and mental health support
  • Ensure line managers have training on the link between mental health and money and know how to have a constructive conversation with team members on the topic
  • Ensure you carry out any reasonable adjustments that are requested; our research shows that two thirds of people who have requested adjustments haven’t had their requests met, or fully met
  • Use wellness action plans so line managers can identify behaviours that might signal a team member’s mental health are deteriorating. Ensure this plan covers how the individual wants to be helped in the event of this happening
  • Understand that having good financial wellbeing is not about how much an individual earns – common symptoms of having a mental health problem mean that anyone can be at risk of falling into financial difficulty, even if their income is good and they appear to be financially stable
  • If it gets to the point where an employee has to reduce their hours due to mental health problems, contractual sick pay policies that enable employees to reduce their hours and claim it alongside receiving payment from an employer for part-time hours can be a great source of support. This is better than an individual forcing themselves to plough on at work until they breakdown and need to take an extended period off work
  • Bear in mind that, according to national statistics, it is likely that a quarter of your workforce will, at any given time, be dealing with a mental health problem – whether they tell you or not. It’s in your interests to create an environment where they can disclose their problem comfortably

You might also like:

What HR can do to support financial wellbeing through the cost-of-living crisis: 6 Key themes from the webinar

13 Mistakes to avoid when opening up the conversation about money with employees


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