The True Cost of Employee Financial Stress: Signs HR Should Look For
Since the pandemic began, HR teams have become keenly aware of how employee stress can dramatically impact the workplace. The challenges brought on by COVID-19 changed how we work and how human resources support employees. Employees encountered numerous issues throughout the pandemic, but financial stress has been one of the most widespread and long-lasting.
Employees who kept their jobs at the start of the pandemic have not been immune to significant financial hardship and stress. Nearly 70% of employees reported financial stress in 2020— a number that has only dipped slightly since. While rates of financial stress have certainly increased, money has always been a source of anxiety for employees. Before the pandemic, money was the number one stressors for U.S. adults year after year.
Compensation and employee benefits have always been a major part of HR management. But, employee financial stress has only recently become a focus of human resources teams. As many employees are experiencing financial stress, HR should understand what it looks like and how it impacts the workplace.
Signs of Employee Financial Stress
Employees experiencing financial stress may exhibit certain behaviors that indicate that they are struggling to get by. As work and personal finance are closely connected, employee financial stress can show up in the workplace. To support employees struggling with finances, HR should keep an eye out for specific signs of stress.
Employees experiencing financial stress may:
- Request payday advances
- Frequently request or work overtime hours
- Withdraw from their 401k or other retirement savings accounts
- Reduce or eliminate their contribution to retirement savings accounts
- Take on a second job
- Spend time discussing or managing their finances at work
- Be more prone to preventable illnesses like the cold or flu
- Have unexpected absences from work
Because financial stress can be all-consuming, employees may struggle to hide the signs that they’re experiencing financial hardship. However, HR can identify employees who are struggling by keeping an eye out for the signs of financial stress and offering employees support before it impacts their job performance.
How Financial Stress Impacts Employee Performance
It’s no secret that employees’ personal lives influence their work lives and vice versa. Because employees don’t leave financial stress at home, it can impact their ability to do their job. Constant worry about paying bills or debt is distracting, making employees less productive and engaged at work. Over time, this can hurt employees’ job performance and productivity.
Each employee has responsibilities to themselves and their families that can be stressful, even without financial hardship. According to a 2021 study, 86% of employees who experience financial stress reported higher overall stress levels in their lives. In addition, high levels of stress make team members less productive and more prone to error. When stress goes unchecked, team members are also more prone to burnout and absenteeism.
When employees have money issues, they often spend work hours on personal financial tasks rather than job tasks. Unfortunately, these hours add up, especially if employees are experiencing long-term financial hardship. Over time, this form of presenteeism can lead to missed deadlines and poor quality of work. In addition, when stressed employees perform poorly, it impacts their team’s ability to meet its goals.
The Cost of Employee Financial Stress in the Workplace
When team members are distracted by financial issues and are less productive, organizations pay the price. For example, the average employee struggling with financial stress spends 20 workdays focused on or managing money matters at work. That doesn’t just impact an organization’s ability to meet business goals; it carries a hefty price tag. One full-time employees’ lost productivity over personal money matters can cost an organization nearly $4,000 annually.
Companies also pay the price when employees’ financial health influences their long-term career plans. More and more employees are delaying their retirement due to financial concerns. As the retirement age continues to climb, companies should expect to pay experienced employees higher salaries, longer. However, changes to retirement planning aren’t just about wages; they can carry other financial risks for your organization, too.
As the retirement age increases, healthcare-related costs also increase— as does the risk of workers’ compensation claims. When employees reach middle age (55-77), their health naturally diminishes, and their need for medical care increases. As a result, employers can expect to pay more in health-care-related benefits alongside these shifts in employee demographics. Workers’ compensation claims also increase with age and ultimately impact a company’s bottom line.
What’s Next: Reducing Stress & Promoting Financial Wellness
Knowing the signs of employee financial stress is the first step HR can take to minimize its impact on the workplace. With a solid understanding of how financial stress shows up in the workplace, your team can determine how to support employees. A practical approach addresses employees’ stress levels and their financial wellness.
Your HR team can help your employees prevent the circumstances that lead to higher stress levels by offering a financial wellness program. Unfortunately, employees may not have the financial education they need to make good decisions about their money. But, HR teams can run financial wellness programs to help. In addition, employers often offer financial coaching to help employees learn ways to manage personal finances more effectively.
A financial wellness program improves employees’ financial literacy by teaching them how to budget, save, and invest. These programs can also help employees manage debt and create payment plans for things like student loans. Your HR team can reach out to your organizations’ financial institution or EAP to see what employee financial education courses they offer. There are also plenty of free online tools and resources like budget calculators that HR can share with employees.
Financial stress, like any kind of stress, is detrimental to employees’ mental health. However, economic hardship alone doesn’t impact job performance; it’s the resulting stress that is most harmful. Mental health programs for the workplace can teach employees how to manage their stress more effectively. Consider introducing a well-being program that gives team members the tools and skills they need to keep stress at bay.
How well employees manage life’s challenges can have huge implications on your organization. If you’re interested in learning more about how employees’ well-being shows up in the workplace, check out Pathways at Work’s latest report on employee mental health.