7 Reasons Why Your Employees’ Financial Wellness is a Corporate Matter
Reading time: 7 minutes
It’s no longer a secret. Dealing with money issues is not just affecting employee’s personal lives, it is also affecting their focus and productivity.
In fact, up to 9 out of 10 employees are stressed about their finances.
And employees have declared that they are losing 1 day a week of work to financial anxiety, i.e. 2.5 months a year. So yes, personal finances are both a corporate and a personal matter.
“The workplace is an ideal setting to offer financial education and help employees to make an effective use of their financial resources”
Investing in employees' financial wellness is not just a nice-to-have; it's a necessity for fostering a healthy workplace culture. By prioritising this aspect of employee well-being, organisations can enhance productivity, improve retention rates, and build a positive brand reputation.
As an employer, understanding and addressing these challenges can lead to a happier, more engaged workforce and better productivity, and that’s good for business.
Agenda
The Top Reasons Causing Financial Stress
How Does Financial Stress Impact Employees and the Business?
What is Financial Wellness?
The 7 Benefits of Investing in Employee Financial Wellbeing
Supporting Your Employees’ Financial Health
The Top Reasons CAUSING Financial Stress
Financial concerns are often cited as the primary source of stress, outpacing worries related to personal health and job pressures. Several key factors contribute to this financial anxiety:
External Factors
Inflation and High Living Costs: Keeping pace with rising expenses can strain budgets.
Debt: Student loans, credit card debt, and mortgages significantly heighten financial stress.
Economic Downturn: High interest rates and market volatility create uncertainty about the future.
Internal Factors
Financial Knowledge: A lack of understanding about managing finances can leave individuals feeling ill-equipped.
Financial Attitude: Unhealthy beliefs and attitudes toward money cloud employees from making rational financial decisions.
Financial Behaviour: Even with knowledge, many do not know how to implement it in practical ways on a day-to-day basis.
Indeed, while many surveys focus solely on financial literacy, the OECD (Organisation for Economic Cooperation and Development) conducted an “International Survey of Adult Financial Literacy” across 39 countries, assessing not only financial knowledge, but also financial attitudes and behaviours.
In 2024, over 52% of employees reported struggling financially, with 35% living paycheck to paycheck in Hong Kong. This financial insecurity leads to increased anxiety and stress levels, with 63% acknowledging that their financial situation negatively impacts their overall well-being.
The interplay of these external and internal factors creates an environment ripe for stress that often spills over into the workplace.
How Does Financial Stress Impact employees and the Business?
Financial stress not only affects individual employees but also has significant implications for organisations as a whole. Research highlights several key areas of impact:
Impact on Physical and Mental Health: Financial stress significantly impacts employees' physical and mental health, leading to poor overall well-being, sleep disturbances, and increased susceptibility to illnesses. Additionally, 83% of employees still report being burnt out, and the top two reasons are financial strain and exhaustion.
Reduced Productivity: Approximately one in three full-time employees acknowledges that financial issues have adversely affected their productivity at work. This decline in focus can hinder overall performance and team dynamics.
Increased Absenteeism: Financial worries often lead to higher absenteeism rates. Stressed employees may take more sick days, resulting in disruptions to workflow and increased pressure on remaining team members.
Higher Employee Turnover: There is a clear link between financial stress and elevated turnover rates. In fact, 78% of leaders reported that financial concerns contributed to employee departures in the past year.
“Consequences of Financial Stress at Work”
Source: Zellis (2003)
This turnover can be costly for organisations, both in terms of recruitment expenses and lost institutional knowledge.
These findings emphasise the critical need to address financial wellness as part of a comprehensive employee support strategy. Indeed, employees report losing an average of seven hours of productivity each week due to financial stress, which translates to a monstrous cost of $183 billion annually for employers.
By prioritising financial wellness initiatives, organisations can foster a healthier, more productive workforce.
What is Financial Wellness and how to contribute to it?
Understanding Financial Wellness
Financial wellness refers to an individual’s overall financial health and encompasses several key dimensions, including:
The ability to meet current and ongoing financial obligations
A sense of security regarding future financial stability
The freedom to make choices that enhance quality of life
Recognising these aspects is essential for creating effective support systems within organisations.
Traditional Financial Education
Traditional financial education often focuses heavily on imparting financial knowledge, which is undoubtedly important. However, this approach alone is frequently insufficient for driving meaningful changes in financial attitudes and behaviours.
Modern Financial Education
To foster true financial wellness, a more holistic approach is needed that addresses:
Financial Knowledge: Understanding financial concepts and tools.
Financial Attitude: Developing healthy beliefs and perspectives about money.
Financial Behaviour: Implementing practical skills and habits for managing finances effectively.
As recommended by the OECD, to truly capitalise on these benefits, organisations must also focus on closing the financial behaviour gap among employees. This gap refers to the disparity between employees' financial knowledge and their actual financial behaviours. Even if employees understand financial concepts, they may struggle to implement them effectively in their daily lives.
“Financial attitudes are important components of financial literacy, because even if an individual has sufficient knowledge and ability to act in a financially prudent way, their attitudes will influence their decision of whether or not to act.”
By addressing this gap, employers can help employees translate knowledge into action, leading to improved financial habits and decision-making.
To truly capitalise on these benefits, organisations must also focus on closing the financial behaviour gap among employees. This gap refers to the disparity between employees' financial knowledge and their actual financial behaviours. Even if employees understand financial concepts, they may struggle to implement them effectively in their daily lives. By addressing this gap, employers can help employees translate knowledge into action, leading to improved financial habits and decision-making.
the 7 Benefits of Investing in Employee Financial Wellness
Another 2024 USA study has showed that at least 9 out of 10 leaders believe that employers should support employee financial wellness.
Investing in the financial well-being of employees can yield the following 7 benefits:
Higher Productivity: When employees are less preoccupied with financial issues, their focus and productivity improve.
Lower Absenteeism: Enhanced financial wellness often correlates with better mental and physical health, resulting in fewer sick days.
Attracting and Retaining Talent: Companies recognised for supporting employee wellness are more likely to attract and retain skilled workers.
Timely Retirement: Providing employees with the knowledge to manage their finances effectively can facilitate timely retirement planning.
Improved Mental Health: Gaining control over finances can improve mental health, as 92% of those with mental health challenges struggle with financial decisions.
Respond to Employee Needs: 74% of Malaysians expressed interest in attending financial training programs, highlighting a demand for financial education.
Lower Healthcare premium: Investing in financial wellness can lead to lower healthcare premiums, and therefore cost-saving for the employer.
These factors contribute to a more engaged workforce and a positive organisational culture.
In fact, since 2018, the OECD-INFE has created a Working Group on Financial Education in the Workplace, stating:
“Time participation does not require employees to give up their leisure time or actively and independently seek appropriate courses. [...] Workplace education programmes have led to an increase in enrolment and/or contribution into pension schemes. [...] Research also indicates that workplace financial education is seen as a benefit by employees, which may increase motivation and retention.”
Supporting Your Employees’ Financial WELLNESS
Employers are increasingly recognising the importance of addressing financial stress as part of a comprehensive employee support strategy.
Research shows that a significant majority of employers believe they should play an active role in enhancing their employees' financial wellness
.
To support this initiative, organisations can implement various programs such as:
Financial education workshops
Access to counseling services
Tailored benefits packages that address specific employee needs
Given the current economic downturn and rising inflation, addressing financial stress has never been more critical. The correlation between money issues and mental health creates a vicious cycle: increased financial stress can lead to mental health challenges, which in turn can exacerbate financial worries. Addressing these interconnected issues is essential for fostering a healthier workplace.
By creating an environment where employees feel supported in their financial journeys, organisations empower them to take control of their finances. This empowerment leads to improved mental health, increased productivity, and a more harmonious workplace.
In conclusion, prioritising employee financial wellness is not just a moral imperative - it makes sound business sense.
By investing in modern financial education of your workforce, you close the financial behaviour gap among employees, which ensures that the knowledge gained through financial education translates into actionable habits. When employees can effectively apply what they learn about managing their finances, you cultivate a more productive, engaged, and satisfied team while enhancing your organisation's reputation as an employer of choice.
