Financial wellness in the Australian workplace

To create a productive workplace it is important to ensure employees are engaged, but financial stress could be undermining your efforts.

Our latest research into financial wellness in Australia shows that employees who suffer from financial stress are less engaged at work and more likely to underperform. Each year financial stress costs Australian employers $47.2 billion. That’s no small change.

That’s why we’re dedicated to supporting your employees’ financial wellness. Our research takes a deeper look at the triggers and impacts of financial stress. Because strong insights help us bring you effective solutions.

Financial wellness affects employers’ bottom line

ContentsOur financial wellness study delivers new insights 2

There’s science to defining financial wellness 3

Financial stress is a national problem 4

Employers are impacted by financial stress 5

Your industry can increase your financial stress 6

Five triggers of financial stress stand out 6

Who’s most at risk of financial stress? 7

Having financial goals can help 8

Building financial confidence 9

Financially stressed employees struggle to understand super 10

How we help boost financial wellness 11

2

Many employers have initiatives in place to foster overall employee wellbeing. Yet most programs fail to consider employees’ financial wellness. Financial stress not only negatively affects employees, it also costs employers big money.

In 2014, we commissioned research into financial wellness in the Australian workplace. Our research revealed that financially stressed employees are less engaged, less productive and more likely to leave.

This year we expanded our research to identify the triggers of financial stress and how we can help build financial confidence. With these insights, we’ll continue to enhance the way we support your employees’ financial wellness.

How our research was conductedOur research was conducted by TNS exclusively for AMP. The results were gathered in June 2016 from online interviews completed by over 2,000 Australian employees. From here the data was post weighted based on the Australian Bureau of Statistics data.

Our financial wellness study delivers new insights

2014Does financial stress exist in the Australian workforce?

What impact does financial stress have on employees?

2016What triggers financial stress?

How can we prevent financial stress?

?

3

Financial wellness is a mindset forged from the way a person evaluates their finances and how it makes them feel. This mindset can be determined on a financial wellness spectrum; ranging from a negative destructive mindset known as financially stressed, to a positive mindset known as financially secure.

= 75%more financially secure

= 25%most financially stressed

The financial wellness spectrum

Distinguishing between the two may seem simple. Yet when you look closer, there’s more to it. Financial wellness is made up of two key factors:

Cognitive processing

– An individual’s perception of their current financial situation relative to their expectations

– An individual’s perception of their future finances against their aspirations (future goals which are both pre and post retirement)

– The context or lifestyle that an individual lives (social, environmental, and personal)

Cognitive“How I think”

Emotional“How I feel”

Emotional response

– A feeling of worry or foreboding about finances

– The anxiety caused by finances

– An insatiable feeling of guilt around finances

Considering the cognitive and emotional components is critical to understanding the extent of financial stress among Australian employees. This enables us to identify how we should treat financial stress, in order to help employees feel more financially secure. It also gives us a greater understanding of financial stress, revealing key triggers and implications for employees and employers.

There’s science to defining financial wellness

4

Financial stress is a national problem

A large number of Australians lack the confidence to manage and take control of their finances. Our research reveals that 2.86 million Australians are feeling financially stressed – across all industries, income levels and job roles. That’s 24% of all Australian employees.

Employees in Brisbane are most financially stressed (30%), while employees in Tasmania demonstrate the lowest levels of financial stress in Australia. Compared to 2014, financial stress levels in Melbourne have fallen dramatically from 32% in 2014 to 19% in 2016.

30%

25%

16%

19%

Brisbane

20%Sydney

Adelaide

23%Perth

18%Darwin

Hobart

Melbourne

18%Canberra

2.86 millionof Australian employees are financially stressed that’s

Australians in 2016

24%

5

Employers are impacted by financial stress

Financial stress is a significant problem for Australian employees, and it comes at a high cost to employers. Employees who are financially stressed are less satisfied with their lives, less engaged with their employers and ultimately are more likely to underperform at work.

Our research shows it has a negative impact on key performance outcomes such as job dedication, productivity, innovation, turnover, absenteeism and efficiency. This represents a total cost of $47.2 billion to Australian employers annually.

Australians employed

11.97 million

per year in lost revenue

$47.2 billion

suffer from financial stress

24%

The time lost weekly due to stress related presenteeism.

6.9 hours On average, financially stressed employees take an additional four sick days annually.

+4 sick days

$38.76 average Australian hourly rate (gross)

6

Your industry can increase your financial stress

Five triggers of financial stress stand out

Financial stress is common across the Australian workforce, but some industries are more impacted than others. The top six industries with the highest incidence of financial stress are listed below.

Triggers of financial stress are not the same for everyone, but five key themes dominate our findings. These are shown below. Other stress triggers include life events such as moving house and starting a new job.

Public administration and safety

26% | 28%Administrative and support services

31% | 33%

Health care and social assistance

32% | 31%

2016 2016 2014 2014

Accommodation and food services

35% | 44%

Retail trade

26% | 33%Mining

26% | 9%

Bad debt1 2 Home loan 3 Retirement 4 Supporting the family 5 Budgeting

7

Who’s most at risk of financial stress?

Casual workers are at substantial risk of suffering from financial stress. Single parent families and females also remain top risk segments.

Low income is still correlated with financial stress, with 34% of low income earners reporting that they feel financially stressed. However, high income earners in the top salary bracket show an increase in financial stress levels compared to our 2014 findings.

2014

32

Females (vs 19% males)

30

Casual workers(eg freelance or

contractors)

54

n/a

Single parents

3642

2016

Demographics with the highest incidence of financial stress (%)

17

23

362014 2016

Financially stressed employees by salary bracket (%)

2218

1316

25

8

$15,000 to $49,999

34

$50,000 to $74,999

$75,000 to $99,999

$100,000 to $149,999

$150,000 and above

8

Having financial goals can help

Financial goal setting could be an important factor in the prevention of financial stress.

While 80% of employees reported to have financial goals, our research shows that financially secure employees are significantly more likely to have clearly defined goals than their financially stressed counterparts.

Financially stressed employees are less likely to set themselves financial goals. When they do, the goals are usually focused on debt and less on retirement or investments.

Financial goals (%) Plan to achieve financial goals (%)

Many clear goals Couple of goalsHaven’t thought about goals

Thought about setting goals

60%Net goals

72%Net plan

37%Net goals

59%Net plan

16 218 8

44

51

29

52

2210

36

13

18 1827 27

Financially secure

Financially secure

Financially stressed

Financially stressed

Track their goals (%)

32+41+27+I32

41

27

Financially stressed 50+32+18+I50

32

Financially secure

18

NoNo financial goals

Yes

Defined plan Loose planNo plan No financial

goals

9

National Secure

Building financial confidence

Data from our research indicates that most employees are unprepared to deal with financial risk they face during their working lives. This ranges from managing their finances, to buying a home or saving enough for a comfortable retirement.

Only one out of three Australian employees are confident they will have a comfortable retirement:

– Among financially-stressed employees, confidence is very low and decreases over time especially halfway through their career.

– Among all other employees, confidence is still low until around 50 years of age.

Confidence in having a comfortable retirement (% extremely or very confident)

more than 40 years

31 to 40 years

20 to 30 years

11 to 20 years

6 to 10 years

1 to 5 years

100

90

80

70

60

50

40

30

20

10

0

(%)

Anticipated years left to retirement

Secure NationalStressed

Stressed

including 12% extremely confident

including 10% extremely confident

including 3% extremely confident

41%34%11%

10

Financially stressed employees struggle to understand super

Financially secure employees are more knowledgeable about their superannuation. Understanding fees, charges and superannuation statements remains a challenge among financially stressed employees.

Financially stressed Financially secure

I have worked out how much I will need to save for retirement

I read and understand my superannuation statements

I know that a percentage of an employee’s salary is required to be paid

by an employer on behalf of an employee

I know that employers are obliged to make contributions

on behalf of employees

I understand the fees and charges on my superannuation

I know that superannuation is taxed at a lower rate than other investments

I know that employees can make additional superannuation payments to

any payments made by their employer

17

34

41

46

70

71

79

43 ¬26

¬26

¬21

¬21

¬9

¬8

¬4

60

62

67

79

79

83

Superannuation behaviour and understanding (% of individuals who rated 6–10 (out of 10))

Self motivated

Difference

11

How we help boost financial wellness

At a cost of $47.2 billion every year, financial stress is an ongoing problem for employers as well as the employees experiencing it.

From our research, we believe the answer lies in strengthening employees’ confidence in managing their finances. We know that it’s also important to support employees with setting clearly defined financial goals, to help them own their tomorrows.

We do this through a holistic approach to financial wellness, which includes:

Building confidence through educationWe offer over 20 online education modules, webinars and face-to-face seminars. So your employees can increase their financial literacy in the way that suits them.

Helping at life’s key momentsOur data and analytics capabilities, enables us to provide your employees relevant support, right when they need it.

Responding to employees’ needsWe develop products that respond to your employees’ needs—like our new AMP Bett3r Account. It’s specially designed to empower people to manage their budget and help them reach their savings goals.

Providing access to adviceWe have a network of expert financial advisers ready to assist your employees whenever they want help.

Building employee’s financial confidence is pivotal and a key priority for AMP. Our Financial Wellness program looks at financial literacy as a holistic program, offering a wealth of insights and education resources, ranging from over 20 education modules on the AMP website, webinars and face to face seminars in the workplace.

For further information about AMP’s Financial Wellness program, please contact your AMP account manager.

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9/16

The AMP Financial Wellness report has been prepared by AMP Life Limited ABN 84 079 300 379 (AMP Life). The report is based on research that was conducted exclusively for AMP by TNS. Results were obtained in June 2016. Data was post weighted based on ABS statistics: gender, age, location, working status and industry.

This report cannot be distributed, reproduced, copied or published in any way without the express and written consent of AMP Life.

Product issuer of the AMP Bett3r Account is AMP Bank Limited. Consider your own circumstances and the AMP Bett3r Account Terms and Conditions available from amp.com.au or by calling 131 267 before deciding what’s right for you. This information hasn’t taken your circumstances into account.