John has recently graduated from University and secured a bank job. His family is not wealthy, and he didn’t learn about managing money at school. His life experiences have taught him that money is scarce. His goal is to get rich and have a better life than the one his parents had. The new job’s perks are a reliable source of income, a credit card, and access to “cheap” credit. John is living it up. Whether he supports his extended family or has an extravagant lifestyle, he spends everything he makes with nothing left over for savings.

John is a banker, and there is pressure, perceived or otherwise, to maintain a particular lifestyle. He takes a loan to buy his first car or another status symbol -and thus begins his slippery slide into debt. While John is doing great at work and his salary is growing, he can’t keep up with his expenses. He is taking up more debt with every milestone -a loan for the wedding, the new house, and the kids’ school fees. To make it worse, John has downloaded multiple lending apps and borrows money to finance his monthly budget deficit. He has no savings and didn’t even take up his employer’s offer to match his pension contributions. He lives in the moment and is one financial shock away from poverty: one incident and his life crumbles.

John’s financial situation is not unique. He didn’t set out to get into financial distress, but his lack of financial literacy pretty much guaranteed that he would end up here. Financial management is an essential skill for adult life, but most adults find themselves ill-equipped. We didn’t learn about money at school, and in an economy where people are barely making ends meet, most of us didn’t get a practical experience of managing money until we had our first job or run our first business. If John’s first job came with a financial wellness programme that gave him the tools and knowledge to handle his money, would he make the same mistakes?

What are financial wellness programmes?

Financial wellness is a component of the overall employee wellness programme covering social, physical and emotional health. Financial wellness programmes aim to educate employees on finances, improving their financial health and alleviating financial stress. In the wake of the pandemic, characterised by job losses and reduction in income, it is more important than ever for employers to take an interest in their employees’ financial health.

Why should employers run financial wellness programmes?

Many an employer will ask why the financial wellness of employees is their concern. An employee’s financial distress does not stop once they get into the office. In fact, given that we spend 9 hours a day at the workplace, our turmoil will manifest most significantly at work. An employee who is in financial distress,

• Has more incidents of absenteeism and tardiness
• Is physically present but not productive either because he is unwell,  or mentally absent worrying about money, job hunting or running their side hustle
• Is unhappy with their job
• Is prone to illness and accidents caused by anxiety and general malaise
• Has low productivity due to distractions or increased absenteeism
• Running a wellness programme could reduce these adverse effects and benefit both the employer and the employee. A wellness programme can reduce absenteeism, increase company-wide productivity, and boost staff retention, engagement, and loyalty. In essence, your wellness programme will save you money and increase productivity, even though it costs time and money to implement.

What should I include in my financial wellness programme?

Organisations structure financial wellness programmes around the HR strategy, budget, and the unique needs of their employees. As such, each employer will implement their programmes differently. In Kenya, most companies have focused their wellness programmes around retirement. The structure covers pension programmes and training employees nearing retirement age on money management and adjusting to life post-retirement. While this is helpful, it is a late-stage intervention, and you’ll find most of these employees have not planned sufficiently for retirement. Further, new hires tend to subscribe to the pension programme without training and don’t understand the importance.

If you’re going to invest in your employees’ financial health, I’d recommend focusing on finances in entirety. Your training should include content on the following topics customised for permanent employees and gig workers.

Budgeting speaks to managing incomes and expenses and is essential training for both permanent employees and gig workers. To live within their means, and increase their savings and investments, your employees first need to know how much money they make and how they spend it.

Cash flow management is essential for entrepreneurs, gig and commission-based workers. Unlike the permanent employees, their cash inflows vary month to month, yet their living expenses remain the same. Better planning can help smooth their cashflows to cover their costs without getting into debt.

Record keeping and tracking financial transactions are essential whether you are a business person, salaried or work on commission. However, for the entrepreneur and the gig worker, keeping a record of your incomes, expenses and profits is vital for your success. It determines how to price products or services, declare taxes, and manage cash flow, among other financial management aspects.

Speaking of taxes, few employees know how to file for taxes. Why this is not a subject taught at school is beyond me. Both permanent, commission-based and gig-employees need to understand how to calculate taxes, what tax liabilities they have, the cadence and payment of each tax liability and how to file returns.

Pension programmes and retirement planning are some of the long-term benefits that organisations use to retain employees. In addition to NSSF payments, some employers have additional pension programmes. Pension contributions are tax-deductible, reducing your employees’ tax liability up to a specific limit. Include all employees in training sessions on pension and retirement, not just those about to retire. Planning for retirement requires you to define what financial security means to you and will help your employees make the right decisions even in the short-term.

Medical insurance is one of the most prevalent perks of employment. Employees know they have an insurance cover but not how it works, its exclusions or benefits. Ensure your employees understand the medical insurance benefit: the limits, the number of people covered, what it covers, how to increase coverage and how to make the most efficient use of your cover. You will not improve your loss ratio if your employees don’t understand what it means.

In addition to medical insurance, employers can talk about other insurance products like property insurance, life insurance and education policies. A reader recently told me that the only reason she still banks with Stanbic Kenya is their income protector insurance cover. Insurance is one of the least used financial services products in Kenya, primarily due to a lack of awareness and understanding about its variants, usage, and benefits. Work with insurance companies and agents to provide your employees with information about insurance products.

While we have a savings culture in Kenya, we don’t make our money work for us, and making investments often feels like a potential episode of Pata Potea. Providing training on income-earning accounts and how to invest their savings to purchase assets will help your employees reach their goals faster. Partnering with SACCOS, mutual funds, and other investment schemes is particularly helpful.

Another important topic to discuss is your employee stock options scheme. Some organisations give their employees shares but do not explain how they vest, what happens if they leave the company, what consideration or payment they need to make in exchange of the shares or the taxes incurred. As you give out shares, make sure your employees understand what it means.

Managing credit is a vital component of any financial wellness programme. Kenyans are increasingly financing their lifestyles on credit but find themselves flatfooted when it comes to managing loans. Help your employees discern when to use credit, how to build up a credit history, credit scores, available loan products, what to look out for in the terms and conditions and the consequences of default.

In addition to training, you can help your employees, especially those on short-term contracts and gig or commission-based workers, gain access to loans. As an employer, you can partner with SACCOs, MFIs and banks to provide your employees’ loan products.

How do I start a financial wellness programme?

The easiest way to provide financial wellness is through training. You can train through workshops, brown bag sessions or content uploaded on your internal learning management system. You could run these sessions internally or work with third-party consultants or financial institutions. As you conduct this training, please advise your employees that you take no fiduciary responsibility, and they must do their due diligence and make the final decisions.

Another cost-effective way of providing financial literacy training and wellness programmes is through online Apps. The organisation subscribes for group membership, and employees get access to these Apps that allow them to track their finances and get personalised advice. Employees are required to opt-in, and as with training, they take responsibility for their decisions.

Partnership with financial services providers is another way to provide financial wellness training and products for your team. You could partner with banks, SACCOs or MFIs to get cheaper bank accounts for your employees. Instead of giving salary advances from your balance sheet, affecting your cash flow, you could partner with these institutions for short-term loans at a negotiated rate. You could even partner with them for long-term loans like asset finance, mortgages and education loans. You can work with insurance companies on education policies, pension plans, investment options, and medical covers for extended family or just increasing coverage for employees’ families.

In summary…

Financial wellness is a vital component of your employees’ wellbeing. With an education system that treats financial literacy as an afterthought, organisations need to invest in their employees’ financial health. These programmes can be standalone efforts focused on training. However, they are most effective when they augment existing employee perks and benefits, whether your employees are permanent or gig-workers. You can complement your financial literacy sessions by providing employees tools like Apps or access to products like a pre-negotiated bank account, loan and insurance product. Remember, enabling your employees to meet current and future goals, feel secure about their financial future and have options to make choices about their financial lives benefits the organisation in the long-run.