Stress is an unavoidable part of life. While some amounts are manageable, too much stress over time can lead to physical and mental health maladies—not to mention the negative impacts on morale and performance.
That’s why it’s crucial for companies to address employee stress in the workplace. But where do they start?
According to Purdue University, finances are the number one cause of stress and anxiety for employees (73%)—more than the work itself (49%). At the same time, a PwC survey found almost 60% of workers agree that compensation isn’t keeping up with the rising cost of living—which is up from 41% in 2021.
Of course, each employee has a unique financial situation, so there’s rarely a one-size-fits-all solution for tackling the problem. For instance, one worker might have anxiety over an unexpected expense or saving for retirement, while another might have a debt repayment or spending issue. Providing extra money through compensation or bonuses might help the former, but the latter might benefit more from guidance on money management.
Before employers can improve their workers’ financial literacy and wellness, they first need to recognize the serious impacts financial anxiety can have, both on individuals and organizations.
How To Spot Financial Stress in Employees
When workers are dealing with high levels of stress, they can experience a number of personal issues that aren’t always noticeable to an outsider. Financial difficulty, in particular, can lead to employees feeling overwhelmed, unmotivated, and disillusioned with their jobs.
These feelings can manifest in a variety of ways, such as:
Physical health issues
Mental health issues
Sleeping problems
Reduced socialization
When Financial Worry Impacts Business
While poor mental health isn’t easily communicable, employees can still bring their financial stress to work. Not only does this impact overall morale and company culture, but it also has a direct impact on an organization’s bottom line.
It Harms Company Culture
When employees show up to work with financial stress, they’re not in a position to perform at their best. This can hinder collaboration and team-building, as well as interfere with the essential interpersonal connections employees make at work.
If financial worry is a common problem among employees, it can amplify these company culture issues, accordingly impacting the entire organization.
It Decreases Productivity
It’s not abnormal for employees to get a little sidetracked at work now and then, but when an unexpected expense or the next monthly payment is top of mind, it’s far too easy to lose focus (and time).
In fact, PwC found that those who are worried about money are nearly five times as likely to be distracted. And among that group, 56% spend three or more hours per week dealing with a financial issue while at work.
It Increases Absenteeism
As employees lose motivation and productivity due to financial worry, they start feeling disengaged. This can lead to them taking more days off or calling off unexpectedly.
According to the American Institute of Stress, organizations lose around 275 million workdays per year due to employee stress. While not all of these lost hours are due to financial difficulty, it still acts as the primary cause of stress among workers.
It Leads to High Turnover Rates
In addition to feeling disillusioned at work, the rising cost of living can force employees to look for new opportunities.
Organizations witnessed this firsthand during the Great Resignation of 2021, when 63% of employees quit their jobs due to low pay. Although this wave of resignations has mostly subsided, 46% of employers have still seen a rise in turnover rates in the past year alone.
It Costs More to Hire and Train Employees
Finally, when employees leave due to their financial situation, it can actually create money stress for the organization.
According to SHRM, the total cost to hire a new employee can be up to four times the position’s salary—not to mention training and onboarding expenses. Plus, hiring a new candidate requires the company to compete with rising compensation rates.
5 Ways Employers Can Promote Financial Wellbeing
Financial stress is a serious issue that can have severe impacts on both employees and employers. Fortunately, company leaders are stepping up, with 97% of employers feeling an increased responsibility to support their workers’ financial wellbeing.
So, what can leaders do to help employees in the workplace? Here are five ways employers can reduce financial stress for their employees:
- Increasing Compensation
- Keeping or Improving Benefits
- Helping Employees with Student Loans
- Implementing Savings Programs
- Offering Financial Education
Increasing compensation is an obvious and important first step in improving financial wellness—and one that 80% of companies are taking in 2023. This seems to align with employee perceptions, as 83% of workers expect a pay raise this year.
Outside of an organization’s existing workforce, increasing compensation can also be an attractive recruitment tool. Of course, the extra money will certainly help reduce financial anxiety, but it isn’t always a practical solution for every business.
Employers are also reviewing their benefits packages to improve the financial wellbeing of their employees.
While some are cutting back in preparation for a recession, others are keeping their financial wellness benefits or even making improvements. This strategy can work with or without an increase in compensation, helping organizations stay competitive as other employers cut benefits to save costs.
Another financial wellness benefit some companies are offering is help with paying back student loans. And with monthly payments starting back up this fall, younger employees are more than ready for this increased financial support.
Today, Americans have a total of around $1.75 trillion in student loan debt. On the individual level, making this monthly payment can cause immense financial anxiety—especially when employees are already living paycheck to paycheck.
Currently, employers can take advantage of a Qualified Educational Assistance Program to give each employee up to $5,250 per year in tax-free money for student loan debt repayment.
For employees without student loans, employers can consider setting up savings programs, such as an emergency savings account (ESA).
These accounts operate similarly to a 401(k)—employees choose to have a portion of each paycheck automatically deducted and put into the account fund. While ESAs tax contributions as regular income, the funds are available whenever employees need them. This is an excellent way to set up an emergency fund to help workers when an unexpected expense arises.
One of the best ways to reduce money-related anxiety in the workplace is to implement financial wellness programs.
These initiatives aim to educate employees and improve their financial literacy, giving them the tools they need to handle their unique financial situations with confidence. That way, they can take money management into their own hands, using what they know about financial planning to develop smart habits that reduce stress.
Promote Financial Wellness for Employees with WellRight
At WellRight, we help employers transform their workplaces and empower their employees with tailored wellness programs. Our new ebook, “The Business Case for Financial Wellbeing,” provides evidence-based solutions for implementing financial wellness programs that deliver real results.
Read it here, or contact us for more information.
