Employees suffering from financial challenges negatively impact your bottom line. Here's what to do.
While the U.S. is the world’s largest economy and one of the wealthiest countries globally, its citizens struggle with money.More than three-quarters of Americans are worried about their finances, 125 million live paycheck-to-paycheck, and money has remained the number 1 stressor for respondents of the American Psychological Association’s annual stress survey since its inception in 2007.
There’s also the infamous statistic that 40% of Americans wouldn’t be able to come up with $400 to cover an emergency expense.
The research and statistics come from far and wide but point to a glaring truth: Workers are stressed about money.
And there’s good reason to be worried. Most workers—irrespective of salary level—are financially insecure. The paycheck-to-paycheck affliction of the masses means people lack meaningful savings or emergency funds, a truth only exacerbated by the pandemic. Forty-four percent of those who say the pandemic negatively affected their financial situation said it would take up to 3 years to recover their pre-pandemic finances. One in 10 don’t think they’ll ever bounce back.
Financial stress is ubiquitous, and it’s affecting your workforce and your business in more ways than you may think.
Financial stress is distracting. For employees worried about high-interest credit card debt, mounting student loans, and unpaid medical bills—on top of affording everyday expenses—it’s easy to see how staying present, focused, and engaged at work could be a challenge.
In place of creating the next winning pitch or landing an influential corporate partnership, employees may be spending time managing their financial situation. One study found employers lose an average of $1,900 per employee per year in lost productivity due to financial stress.
Financial stress takes a toll on workers’ mental health, increasing the risk for workplace accidents. Businessinsurance.com reported that only 2% of the workforce is responsible for about 20% of all workplace accidents.These workers are considered “accident prone,” and accident prone workers are 50% more likely than other workers to suffer a severe injury than the rest of the workforce—a burdensome and costly event for all involved.
But here’s the thing: being accident prone is most often a temporary condition, which lasts 6-12 months, according to Laurence Pearlman, Senior Vice President at Marsh Risk Consulting, as quoted in Businessinsurance.com. Pearlman said that being accident prone is most often caused by stressors at work or home, like a social or financial crisis.
When employees are worried about mounting bills, steep tuition costs, and sizable mortgage payments, among other financial responsibilities, their mental health suffers, leading to other health issues and performance concerns, like absenteeism.
In their 2003 academic paper, Financial Stress and Absenteeism: An Empirically Derived Model, Jinhee Kim and E Thomas Garman found that “those who were more financially stressed were more frequently absent from work,” and “These results suggest that financial stress is one of the key contributing factors to absenteeism.”
Even though money woes don’t disappear with higher paychecks, the prospect of more pay can lead employees to seek employment elsewhere. Financially stressed employees are 2.3x more likely to look for a new job, and Kim and Garam found that “financial stress was negatively related to organizational commitment.”
Taken together, the consequences of employee financial stress cost employers big-time—13-18% of annual salary costs, according to one estimate. And while it’s easy to think the only way to ease financial stress is to pay employees more—an option firmly off the table for most employers—there’s a better way. Rather than paying employees more, innovative employers are stepping up to help employees get more out of their paychecks with a holistic financial wellness benefit.
Look for programs that teach employees actionable advice, like strategies to pay down debt, save, and plan for retirement. The best options are accessible through a single dashboard that makes it easy to understand one’s financial situation with just a few clicks.
Bring financial wellness and financial literacy to employees with targeted workshops that help employees better understand the often-complex world of personal finance. Partner with Certified Financial Planners™ for workshops that advise employees on how to manage finances, pay down debt, save for retirement, and make progress on other savings goals.
Certified Financial Planners™ provide expert guidance and help individuals create and engage in financial planning to meet their short and long-term financial goals. They work as advisors to point employees toward financial literacy and educational resources, then help employees apply this knowledge to their own financial situation.
Employee benefits have significant value—approximately 30% of an employee’s overall compensation package, according to the U.S. Department of Labor. Support employees in managing their financial stress by encouraging your team to tap into the full extent of their benefits packages. Maxing out 401(k) employer contributions is a well-known tip, but encourage employees to use flexible spending accounts (FSA) and health spending accounts, as well as to seek tax advice, too.
Financial stress is an emotionally taxing burden to your most important resource—your people. Support your workforce in building a better financial future by offering a holistic financial wellness benefit today, like Origin.
Origin is an all-in-one financial wellness platform for innovative employers that helps employees manage compensation, benefits, and personal finances—side by side with financial professionals. Learn more about how Origin helps solve the number 1 source of employee stress.
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