A report from health insurance provider BHSF, titled ‘A high wire with no safety net’, details the perilous state of many employee’s finances.
Of 1,000 employees it surveyed across the UK, 37 per cent admitted that they could not pay their bills in the event of ill health, with 28 percent saying they would resort to using credit cards for unexpected bills.
Two thirds of the UK workforce have no sick pay provision beyond the statutory minimum.
Brian Hall, managing director of BHSF Employee Benefits, said the combination of a lack of savings allied to zero sick pay provision, other than the statutory minimum of £89.35 per week, leaves many employees walking a high wire with no safety net.
"By the time mortgages, car repayments, council tax and four-weekly shops are taken into account, the vast majority of the UK’s workforce will find themselves in dire financial straits in a very short period of time, many will be forced back to work when they are not fit to return.”
However, the report also demonstrated that employees are overly-optimistic about their ability to withstand financial shock, with many believing they could last for up to six months.
This is despite high levels of unsecured debt, such as credit cards, averaging circa £1,910, and inadequate savings.
“It is very worrying that employees appear to be in a state of denial over how precarious their financial situation is, in reality,” said Mr Hall.
“All it takes is one short bout of ill-health to leave two thirds of the entire UK workforce in serious financial straits which could take many years to recover from. Average savings will last for little more than six to eight weeks, if that.”
It is those that are most relied upon that are most at risk – the ‘sandwich generation’.
The 30-44 age group was found to be the least resilient when it came to financial problems and more than average unsecured debt.
In fact, debt levels have increased for this group over the last five years. Meaning that this age group, while supporting elderly parents and children, are being stretched to breaking point, with no safety net should they be unable to work due to ill health.
The report also details the chronic over-reliance on credit cards to fund unexpected bills, such as major car repair or a boiler replacement, with 28 per cent of the UK’s working population saying they would fund unexpected bills with a credit card.
Details were also highlighted about the mental impact of financial stress with half of the UK’s working population admitting that they have lost sleep due to financial worries, and a third admitting that financial stress is impacting their job performance.
Worse still, 13 percent admit financial stress is a constant problem.
Mr Hall said employers can do more to help employees become more financially resilient by organising sick pay insurance schemes which can provide a safety net at low cost to the employee and no cost the employer.
At present, the report suggested just 30 per cent of employees benefit from an employer-organised scheme.
“There are low cost insurance schemes available that can provide a safety net, but it needs employers to act as the catalyst in the workplace. If employees truly are the most valuable asset, it is incumbent upon employers to be brave and to help educate their workforce about financial issues such as sick pay.
"All-too-often the subject is swept under the carpet or not adequately addressed with a negative impact on employee well-being and mental health.”
Steve Carlson, chartered financial planner, of Carlson Wealth Management based in Cardiff, said: "I usually meet clients who have life insurance but little or no sick pay provision, when in reality the chances of being unable to work through long term sick are far greater than premature death and the financial consequences can be even more severe."
Scott Gallacher, chartered financial planner, from Leicester's Rowley Turton added: "Unfortunately I'm not surprised by the findings of this report. The UK has savings and protection crisis that has arguably been made worse by the advice gap created by the Retail Distribution Review."
