Employee Financial Stress: Impact, Causes, and How to Deal

You’ve hired the best talent for your business.

You pay them well, offer them benefits, and give them opportunities to grow. But there’s one thing you can’t control: their personal finances!

And that’s a problem.

Because employee financial stress is not only bad for their health and happiness, but also for your business too!

According to PwC's 2023 Employee Financial Wellness Survey, 57% of employees say that financial stress is their biggest source of stress, and 25% say it affects their productivity. That means lower morale, higher absenteeism, and more mistakes.

But how do you know if your employees are struggling with money? What are the signs of financial stress? And what can you do to help them?

In this blog post, we’ll answer these questions and more. We’ll show you:

• What employee financial stress is and why it matters
• How employee financial stress impacts your business in various ways
• What are the warning signs that your employee has financial problems
• What are the common causes of employee financial stress
• What you can do to help your employees manage their finances better

By the end of this post, you’ll have a better understanding of employee financial stress and how to deal with it effectively.

Ready? Let’s dive in.

What is Employee Financial Stress?

Employee financial stress is the feeling of worry, anxiety, and fear that employees experience about their financial situation.

They might not have enough money to pay for their needs, like food, rent, or bills. They might also have a lot of debt or loans that they can’t pay back. This can make them feel stressed and unhappy at work and in life.

Financial stress is a widespread problem that affects millions of workers every day. It’s not just a personal issue. It’s a business issue too.

Impact of Financial Stress on Employees

Financial stress can have a significant impact on employees, both physically and mentally.

• It distracts them from their work: When your employees are worried about money, they can’t focus on their tasks. They make more errors, miss more deadlines, and forget more details.
• It makes them irritable and moody: When your employees are stressed about money, they have less patience, empathy, and tolerance. They snap at their coworkers, customers, and managers. They create more conflict and drama in the workplace.
• It causes them to skip work or show up late: When your employees are stressed about money, they may feel sick, tired, or depressed. They may call in sick more often or arrive late to work. They disrupt the workflow and miss out on opportunities.
• It lowers their motivation: When your employees are stressed about money, they may feel hopeless and helpless. They may lose interest in their work and stop caring about their goals. They perform below their potential and settle for mediocrity.

But that’s not all.

Financial stress can also affect other areas of your employees’ lives that can impact their work performance indirectly. For example:

• Financial stress can harm their health: When your employees are stressed about money, they may experience anxiety, depression, insomnia, high blood pressure, and other health issues. These can make it harder to work and can increase your health care costs.
• Financial stress can damage their relationships:  When your employees are stressed about money, they may argue more with their spouses, families, or friends. They may isolate themselves from others or lash out at them. These can hurt their emotional well-being and their social support.

As you can see, financial stress is a serious problem that can ruin your employees’ work performance and your bottom line.

5 Causes of Financial Stress in Employees

Here’s the list of 5 major causes that can make your employees feel stressed about money are:

• Owing too much money: If your employees have a lot of debt, especially if they pay a lot of interest on it, they might feel stressed. This can happen if they use credit cards or loans to buy things they don’t really need.
• Not having enough money saved: If your employees don’t have enough money saved, they might feel stressed. This can happen if they have to pay for something unexpected, like losing their job or getting sick.
• Not knowing how much money they will make: If your employees don’t have a steady income, they might feel stressed. This can happen if they work part-time, freelance, or on commission.
• Spending too much money on living: If your employees spend a lot of money on living, they might feel stressed. This can happen if they live in a big city, where everything is expensive.
• Having big changes in their family: If your employees have big changes in their family, they might feel stressed. This can happen if they get divorced, lose someone they love, or have a baby.

Warning Signs Your Employee Has Financial Problems

It can be hard to spot if your employee is going through a financial problem, as they may not want to share their personal issues with you.

However, there are some signs that may indicate they are struggling financially, such as:

• Asking for pay or loans more often: If your employee is frequently requesting advances on their salary or loans from the company, it could be a sign they are in debt or facing financial emergencies.
• Wanting to work more hours or shifts suddenly or often: If your employee is volunteering to work overtime, take on extra projects, or cover for other employees, it could be a sign they are trying to earn more money to meet their financial obligations or goals.
• Not joining team events or activities that cost money: If your employee is skipping social events or outings that involve spending money, it could be a sign they are trying to save money or avoid peer pressure to spend beyond their means.
• Worrying or stressing about money: If your employee is constantly talking about money problems, checking their bank account, or avoiding financial discussions, it could be a sign they are experiencing financial anxiety or shame.
• Not using company retirement or benefits plans: If your employee is not taking advantage of the retirement or benefits plans offered by the company, it could be a sign they’re prioritizing short-term needs over long-term goals.
• Coming late or leaving early a lot: If your employee is having trouble managing their work schedule, it could be because they are juggling multiple jobs, dealing with creditors, or facing transportation issues due to financial constraints.
• Doing less work or losing focus: If your employee’s performance has dropped, it could be a sign they are overwhelmed by financial worries or have low morale due to financial insecurity.

What Are The Factors of Financial Stress in Employees?

There are many reasons why employees experience financial stress. Here are some of the biggest factors:

• Low wages: When employees' wages are not enough to cover their basic expenses, they are more likely to experience financial stress. This is especially true for employees who are living paycheck to paycheck.
• High living expenses: The cost of living has been rising steadily in recent years, which has put a strain on many employees' budgets. This is especially true for employees who live in urban areas or who have large families.
• Debt burden: Carrying too much debt can be a major source of financial stress. This can include credit card debt, student loan debt, and mortgage debt. When employees have a lot of debt, they may feel like they are drowning and may have difficulty making their monthly payments.
• Lack of savings: If employees do not have any savings, they may be more likely to experience financial stress during times of unexpected expenses. This is because they may not have any money to fall back on if something unexpected happens, such as a job loss or a medical emergency.
• Inadequate retirement savings: Many employees do not save enough money for retirement. This can lead to financial stress in the later years of life, when employees may no longer be able to work and need to rely on their savings to live.
• Job insecurity: When employees are not sure if they will have a job in the future, they may experience financial stress. This is especially true for employees who work in industries that are prone to layoffs or other changes.
• Lack of financial literacy: Many employees do not have the financial knowledge they need to make sound financial decisions. This can lead to financial stress, as employees may not be able to manage their money effectively or make the best choices for their financial future.
• Healthcare costs: Healthcare costs have been rising steadily in recent years, which has put a strain on many employees' budgets. This is especially true for employees who have families or who have chronic health conditions.
• Family responsibilities: Employees who have family responsibilities, such as caring for children or elderly parents, may experience financial stress. This is because they may have to take on additional expenses, such as childcare or medical costs, and they may have less time to work.
• Unforeseen events: Unexpected events, such as job loss, medical emergencies, or natural disasters, can also lead to financial stress. These events can be financially devastating, and they can take a long time to recover from.
• Payroll issues: Payroll issues, such as late paychecks or incorrect deductions, can also lead to financial stress. This is because employees may not be able to pay their bills or cover their expenses if they do not receive their paychecks on time or in full.
• Lack of benefits: Some employees may not have access to important benefits, such as health insurance, retirement savings plans, or paid leave. This can lead to financial stress, as employees may have to pay for these benefits out of pocket or may not be able to afford them at all.

How Do You Help Employees Who Are Struggling Financially?

Here’s how you can help your employees overcome the most common financial challenges:

Pay them fairly and generously:

This means offering salaries that are competitive with the market rate for similar positions,

...and providing generous benefits, such as:

• health insurance
• retirement savings plans
• and paid time off

Help them slash their expenses:

You can provide financial literacy training, offer discounts on company products or services, or help them negotiate lower rates on bills.

For example, you could offer a financial literacy workshop that teaches employees how to create a budget, track their spending, and save money.

You could also offer discounts on company products or services, such as gym memberships or childcare.

And you could help employees negotiate lower rates on bills by providing them with resources on how to do so.

Help them pay off their debt:

This could include providing access to debt counseling or relief programs or offering financial assistance to help them pay off their debts.

For instance, you could provide employees with access to a free debt counseling service, or you could offer to match their contributions to a debt consolidation program.

Help them build their savings:

This could include matching their contributions to a 401(k) plan, offering other savings incentives, or teaching them how to budget and save effectively.

For example, you could match your employees' contributions to their 401(k) plan up to 6% of their salary.

You could also offer other savings incentives, such as a company savings match or a bonus for employees who meet certain savings goals.

Plan for their retirement:

This could include providing a generous retirement plan, offering regular retirement planning workshops, or helping them invest their savings wisely.

For example, you could offer a 401(k) plan with a generous match, or you could offer regular retirement planning workshops to help employees learn how to save for retirement.

Make them feel secure in their job:

This could include offering long-term contracts or tenure, providing opportunities for growth and development, and recognizing their achievements.

For example, you could offer employees long-term contracts or tenure, which would give them more job security.

You could also provide opportunities for growth and development, such as tuition reimbursement or training programs.

And you could recognize employees' achievements by giving them public praise or awards.

Educate them on money matters and financial literacy:

This could include providing financial literacy training, offering access to financial experts or mentors, or making financial resources available to them.

For example, you could offer financial literacy training to all employees, or you could provide access to financial experts or mentors who can help employees with their specific financial needs.

You could also make financial resources available to employees, such as books, articles, or websites on personal finance.

Help them stay healthy and avoid costly medical bills:

This could include providing quality health insurance, offering wellness programs, or subsidizing healthcare costs.

For example, you could provide employees with health insurance that covers preventive care, or you could offer wellness programs that encourage employees to stay healthy.

You could also subsidize healthcare costs by paying for a portion of employees' health insurance premiums.

Offer work-life balance:

This could include providing paid family leave, flexible work arrangements, or supporting their childcare or eldercare needs.

For example, you could offer paid family leave so that employees can take time off to care for a new child or sick family member.

You could also offer flexible work arrangements, such as telecommuting or flextime, so that employees can have more flexibility to balance their work and family responsibilities.

And you could support employees' childcare or eldercare needs by providing financial assistance or onsite childcare.

Help them cope with emergencies:

This could include providing financial assistance or insurance in case of a job loss, a medical crisis, or a natural disaster.

For example, you could provide employees with a financial assistance program that can help them cover unexpected expenses, such as a job loss or a medical emergency.

You could also provide insurance to help employees protect themselves against financial losses, such as life insurance or disability insurance.

Help them get paid on time and accurately:

This could include ensuring that your payroll system is reliable and transparent and giving them access to their pay stubs online or via mobile app.

For example, you could ensure that your payroll system is reliable by using a reputable payroll provider.

You could also make it easy for employees to access their pay stubs by providing them with online access or a mobile app.

Conclusion

By helping your employees overcome their financial challenges, you’re not only improving their lives, but also your business.

• You’ll boost their morale, motivation, and productivity.
• You’ll increase their loyalty, retention, and referrals.
• You’ll enhance your reputation, brand, and social impact.
• You’ll save money on turnover, absenteeism, and lawsuits.
• You’ll make more money on sales, profits, and growth.

So don’t wait any longer.

Start helping your employees today.

And watch your business soar tomorrow.

Do You Want to Help Your Employees Cope with Financial Stress?

Do you want to offer them a free service that will improve their financial, health, and legal knowledge? Do you want to boost their productivity, loyalty, and engagement?

If you answered yes to any of these questions, then you need our free employee assistance program (EAP). Our EAP brings experts to your company every month. They teach your employees about money, health, and law. They also give them personalized advice and support.

Our EAP will help your employees reduce their stress, increase their confidence, and improve their well-being. And it will help you attract and retain the best talent for your business.

Register your company for our free EAP today by filling out this simple form. It’s easy, fast, and free. Don’t miss this chance to make a positive difference for your business and your employees.

Register now!