Planning and managing employee financial safety may feel like a difficult and time-consuming task for an organisation, but in reality, it can be a fruitful endeavour in the long run. During trying times, such as in the case of a recession, people feel uncertain about the future and often struggle to make ends meet.
When employees are worried about their future, it can have a negative impact on team morale, engagement, and also performance. But companies that ensure the financial security of employees (via workplace savings plan and securing their gratuities for example) during a recession reap massive rewards in terms of long-term business growth.
All signs point towards an imminent recession. In view of the upcoming downturn, it becomes all the more crucial for businesses to retain their best talents by providing them with secure employment and financial safety packages. A business that goes above and beyond to establish itself as an employee-friendly brand will always do well – regardless of the economic season.
Survival modes: How businesses & households are different
It is apparent that during periods of economic crisis, businesses face significant strain on their cash flows and employees and their families experience financial pressure. Businesses feel the need to conserve cash and cut additional costs while families look to ensure their basics are met such as groceries, rent, fuel, school fees, etc.
However, it would be a huge breakthrough if the company and its employees could stand unified to ensure they get through to the other end. This can be attained first and foremost via regular and frank communication between senior management and the teams. This will encourage the staff to do their best for themselves and the company and work hard to keep the business afloat since doing so ensures their own survival.
Everyone would benefit if the company’s management can strike a balance between cutting operational costs while helping employees enroll in programs that teach better financial management. This would reduce stress and increase resilience.
The significance of retaining employees
Employee performance at work is heavily impacted by what they feel about their finances. If they are feeling uneasy about their bank balance, it is only natural that their focus would shift towards paying their bills, earning (and saving) more, and making sure they are able to make ends meet rather than growing the business.
Employees are a company’s most vital assets. However, if they experience severe monetary hardships during a recession, they could decide to look for other opportunities that might provide better financial options in addition to other advantages as confirmed by the 2022 PwC Employee Financial Wellness Survey.
Losing workers, even during peak financial seasons, means businesses are losing financially. This is because finding and training new personnel takes time and is a very costly process – depending on your business sector, industry, and an employee’s seniority level. Everything from identifying, to hiring, and training a replacement costs money.
A company can incur serious financial losses if it consistently fails to keep its staff motivated to stick around. On the flip side, maintaining a positive work environment during tough times is very critical because if companies fail to do so, the low morale of the employees would most likely reflect in their performance.
How to ensure employee financial safety
Give clear assurance to employees
Most employees are unaware of their company’s contingency plans for the future (such as for a recession or financial crisis). The management must be transparent about their future plans with their employees to eliminate insecurity and confusion and put their minds at ease. Honest communication about a business’s finances is also important to avoid last-minute shocks. According to this article by Harvard Business Review, there is a very close connection between employee trust and financial performance.
Creating financial wellness programs can also help employees feel a sense of security. However, the idea is still relatively new for many companies. Organizations may better comprehend employees’ unique needs by developing and maintaining interpersonal communication with them.
Related: New workplace savings scheme for expats working for Dubai government
As businesses tailor financial well-being programs for employees, it’s critical to get to know the staff well enough to understand the difficulties they may be facing when carrying out their responsibilities.
A program like this may include a retirement plan for employees, business credit cards, access to emergency funds (via loans and advances), financial literacy training and tools, and access to expert financial coaches and counselors. All of this will enable employee financial safety and allow for sustained and predictable business growth in the long run.
Measures to protect employees’ salaries and gratuity
A deciding factor as employees choose to stay with a company or leave is also how much a business cares for its people. This means they will look at things like; timely release of salaries, cost-cutting through payroll revisions, reduction in other monetary benefits when employees most need them, etc. Additionally, end-of-service gratuities that are effectively financed and smartly planned are an important subject that should be communicated to enable employee financial safety.
As per UAE’s updated labor laws, gratuity calculations have increased by at least 32% per employee. Gratuity is now calculated at 21 service days per year when employees work with a company for under 5 years, and 30 days per service year if they remain with a company for more than 5 years.
Related: Understanding Gratuity Liability under the UAE’s New Labor Law
Flexible work-from-home policies
We have said it before and we say it again. Flexible work policies and more specifically work from home is the easiest, fastest, and cheapest route to increasing employee productivity. Moreover, Covid-19 has confirmed beyond doubt that most business operations are possible from home.
Employees in the UAE now have access to flexible working options, something that was previously unattainable. The new labor laws now allow various working arrangements, including remote work, joint employment, part-time employment, temporary employment, and variable contract terms.
A flexible work-from-home schedule enables employees to stay close to their families, experience a better work-life balance, and save on additional costs associated with daily commute such as paying for parking spots, fuel, maintaining an office wardrobe, and more. On the flip side, it enables businesses to save on overheads and other costs which can directly lead to business growth.