Why we should invest in our people’s financial wellness – The Business Case

With inflation hitting hard, interest rates we haven’t seen this decade and record credit card debt, most of us are feeling the pinch. Financial pressure is the most pervasive of external stressors. Most of us attach to our relationship with money via its lack or abundance thru social status, success, fear of failure, and freedom of choice. Its perceived lack affects our ability to socialise; we are less likely to take holidays and more likely to cut costs on good self-care such as quality nutrition, and it challenges personal relationships, bringing in conflict and often a sense of inadequacy through not being able to provide for the family. Clients consistently report financial lack is the leading cause of their 3 am wakeups.

Clients consistently report financial stress is the leading cause of disrupted sleep, their 3am “wake up” calls

What the data says:

 The latest PWC 2023 Employee Financial Wellness Survey (2023)   highlighted plenty of reasons why employees might be looking to their leadership team to provide Financial Wellness Services, including:

• 57% of employees surveyed said financial pressure was their Number one cause of stress. Senior Management (earning over $ 100k US) is not exempt either, with 47% reporting feeling financial pressure and 15% acknowledging they run out of money between pay runs.
• Financially stressed employees are twice as likely to seek a new position.
• Staff that were not financially stressed recorded considerably better engagement scores. Un-stressed teams scored up to 36% higher (than their financially stressed associates)  in some of the core survey questions.

‘HR UK’ Magazine recently published a report from obtained police data on reported corporate theft. The data showed a 20% increase in corporate theft YOY due to financial stress, and this was known and reported theft, the currency being cash or goods; what wasn’t measured was the time that staff can also “steal” when they are not feeling optimal for long periods.

How exactly does financial stress affect your people physically and psychologically?

Most of you understand that while we know some stress is good, ongoing chronic stress is not. Financial anxiety can be debilitating and lock people into a downward vortex. Chronic stress affects the human brain in many ways: making reasoning difficult, affecting cognition, increasing anxiety, and lowering mood. Chronic stress heavily impacts sleep, generating many undesirable emotional and physical harms downline. An overactivated stress response system, which brings overexposure to cortisol and other stress hormones, can wreak havoc on the body’s processes and puts you at increased risk of many health problems, including Serious digestive issues, Muscle pain, heart disease, heart attack, high blood pressure and stroke.

The Link to Productivity

Deadlines, product release pressure, and general excitement in a work environment can be engaging and invigorating and increase productivity and engagement in the workplace. But it’s important to note here that no one can work at that pace endlessly and continue to be productive  – we all need to draw our breath. 

There are clear and direct links to loss of productivity when an employee is feeling financial pressure and the effects of chronic stress:

In a significant study, Harter et al.’ conducted a meta-analysis encompassing 199 research studies across 152 organisations in 44 industries and 26 countries, covering nearly 1M employees; they measured a 20% drop in productivity but up to 1000% more errors. Running a quick RPE (revenue per employee) calculation and a 20% drop in productivity across even 40% of your staff reveals an eyewatering loss. Here is a very oversimplified example:

Turnover of $30M/50 FTE = RPE of $600,000. 20% loss of RPE = $120,000 Per stressed employee per annum. * If 25 staff are financially stressed, it offers the potential for a productivity loss of $3M annually.

Stressed and fatigued staff are also more likely to have workplace accidents, be distracted at work, more often conflict with other associates & twice as likely to be looking for other work, which brings a whole new set of costs if they leave and are valued staff. They also have higher absenteeism rates, lower presenteeism, use more of their sick leave, and are less likely to take holidays; this sometimes results in high levels of annual leave liability for employers.

What can employers do to assist financially stressed staff?

Any programmes you offer should address the immediate needs to help “stop the bleeding”, alleviate stress and empower individuals. Are staff aware of any assistance programmes you have?

We may assume that all staff are financially literate. Question: Does your L&D team have a programme offer that is inclusive and culturally sensitive, offering staff these tools? This training could become part of an onboarding process. If your scale doesn’t lend to L&D staff, utilising your connections, what larger scale companies do you know that have these programmes, and what is the opportunity to collaborate?

Staff may act hesitantly to let you know they are stressed, and your first signal could be a resignation. Trust is crucial; ideally, any advice offered needs to be independent, untied to a financial institution or savings plan. Privacy is critical.

Who are your providers? Many healthcare companies offer advice, and leveraging your financial suppliers (company banks) can be a practical option.

I found several options online, even Linked In,  that had no requirement to be a bank customer, such as “Money Matters” by Westpac. It’s free and online – perhaps allowing staff to dial in during work hours would help.

Staff that are financially stressed reported that they spend at least 30 minutes per day distracted dealing with issues around money, that’s three weeks a year – the average annual leave allocation.

Return on Investment

Investing in your people to address their number one stressor has several benefits. If the research is correct, you can expect to see engagement scores increase, general productivity increase, and a more forward-moving culture to work in. Offering independent financial literacy education to staff also means that leaders are less likely to be confronted with difficult discussions around advances, illness, and unrealistic expectations in Salary reviews. See next week’s blog for tips on handling salary increase expectations.