A recent report by PWC shows that finance is the leading stressor among employees experiencing financial instability. This problem can negatively impact your employees’ overall wellbeing, spilling over into their professional lives.
Most notably, financial insecurity can reduce your employees’ productivity, negatively impacting your business’s overall performance (including sales and profits).
Besides sub-par performance, the company may also spend more money and other valuable resources when trying to address and solve the problems affecting employees’ productivity.
Businesses cannot afford to ignore their employees’ financial wellbeing, as doing so can be devastating. Many companies are adopting a pro-active approach by implementing employee financial wellness programs.
Here is an in-depth guide on the importance of employee financial wellness and how to create a program to support them.
What is employees financial wellness?
Definitions of financial wellness vary to suit different people’s perspectives. Generally, financial wellness refers to being in a comfortable financial situation.
Ideally, a financially well-off person should have enough money to pay their daily, monthly, and annual bills and other expenses. Financial wellbeing also entails being able to set aside some money for savings and emergencies. Overall, the person shouldn’t feel stressed or worried about their financial situation.
Unfortunately, many employees’ financial wellness is wanting. Employees were dealing with financial difficulties long before the COVID-19 pandemic, but the pandemic has worsened the situation. The report by PWC indicates that the pandemic has worsened the financial wellbeing of about 63% of employees.
The COVID-19 pandemic has also left many people jobless or earning significantly less than before the outbreak. It has also disrupted the global economy, triggering the worst inflation seen in more than 40 years.
Another recent report by the Federal Reserve indicating that 40% of Americans don’t have enough savings to cover a $400 emergency puts things into a clearer perspective. The report by PWC also indicates that 42% of employees are struggling to meet all of their household expenses.
Why does employee financial wellness matter?
Ideally, your employees shouldn’t let their personal issues interfere with their work. However, it is impossible to disconnect your employees from some aspects of their personal lives, especially their financial wellbeing.
Your employees’ personal financial concerns may spill over into their professional lives, negatively impacting your business.
Here is an overview of three notable impacts of an employee’s financial wellness on your business:
1. Productivity
Employees cannot be optimally productive when their attention and concentration are split between work and their financial challenges. The report by PWC indicates that about 45% of employees struggling with financial difficulties spend several hours at work thinking about their financial situation, which limits employee engagement.
It also indicates that financial challenges are the leading cause of stress among employees.
Besides distraction when working, employees’ financial wellbeing also affects their productivity in many other ways.
For example, some employees may take up another job, which could take up time at their other job (working at your company) and likely leave them too tired to be optimally productive.
It is also worth noting that financial instability may contribute to certain medical conditions that could further compromise your employees’ productivity.
In contrast, good financial wellbeing is reassuring, and employees can focus more on their jobs without worrying about their financial situation.
More notably, offering your employees financial security would motivate them to work harder and be more productive to retain their jobs (and the financial stability that comes with the job).
