The American workforce is currently experiencing a silent financial stress epidemic. Year over year, more and more of the US workforce seems to be becoming financially stressed; in 2023, 92 percent of employees reported feeling stressed about their financial stability (up 72 percent from 2022 and 91 percent from 2021).
Fueled by macro trends, including rising interest rates, inflation outpacing wage growth, increased personal debt levels, and looming recession fears, this financial stress crisis is only worsening, which has significant ramifications for the workplace.
Financial stress in people’s personal lives translates into increased presenteeism, lost productivity, and absenteeism in the workplace. It harms morale and company culture and is a significant cause of employee churn. Financially stressed employees are five times more likely to admit to being distracted at work, two times more likely to look for a new job, and 34 percent more likely to be absent or late. All these effects compound and can cost companies 11-14 percent of their annual payroll costs yearly!
So, how can companies mitigate the effects of financial stress in the workplace when many of the underlying causes are out of their control?
Three steps companies can take to keep financial stress from overwhelming their employees.
1. Support employees with education
This might sound like a “duh, obviously” statement, but financial literacy matters when managing financial stress. A 2022 National FINRA study found that people with higher financial literacy are likelier to make ends meet than those with lower financial literacy. What’s more, today, only about ⅓ of adult Americans have a basic understanding of interest rates, the costs of taking on debt, and financial risk.
For employers, this means that there is a very easy, “low-hanging fruit” way to prevent financial stress from overwhelming employees: provide them with access to basic financial education.
Programs designed to help employees understand how to manage their finances and get fit will go a long way toward helping them manage their financial stress. Employers can help employees understand how to budget for daily life and different milestones, how interest rates work, the strategies for paying off debt, consequences of defaulting on payments, etc., through a variety of mediums, including single in-person sessions, webinars, ongoing education series, and access to general or specialized financial health resources.
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Curate an employee benefits package that addresses employees’ biggest sources of financial stress
Although some might believe that raising salary is the best way to alleviate financial stress, companies can have a more prescriptive impact on their employees’ financial well-being with thoughtful, curated benefit offerings and total rewards packages.
Benefits can incredibly effectively tackle some of the top sources of financial stress for employees. For example, with an employer student loan repayment benefit, companies can help employees save time and money in paying off their student loans, which are the top source of financial stress among employees with student loans (roughly ⅓ of the workforce).
Other sources of financial stress, such as dependent care, healthcare, and retirement savings, can also be alleviated with benefits.
Especially in the case of tax-free fringe benefits like employer student loan repayment or dependent care accounts, benefits that directly solve a pressing financial need can often be more effective than a salary raise because every benefit dollar can be put towards the financial concern.
3. Bring attention to the benefits and programs that will address your employees’ financial concerns
Whether you have existing benefits and programs or plan to adopt new offerings, be sure to publicize them so that your current and future employees will know they exist and how to take advantage of them.
According to a 2022 Employee wellness survey by EBRI, many companies have room to improve when marketing their benefits internally. Even when companies offer holistic financial and emotional wellness benefits, less than half of employees understand, let alone are aware, that they exist. That’s why once you’ve taken steps to support your employees’ financial well-being and keep them from being overwhelmed by financial stress, don’t forget to highlight your total rewards program on all fronts!
Making it clear how your benefits package has been thoughtfully designed to impact your employees’ financial, physical, and emotional well-being can not only help reduce the negative effects of financial stress for your employees but also help promote loyalty, brand connection, and employee engagement within your company. It’s a win-win.
By supporting employees with access to financial education, personalizing total rewards programs with high-impact benefit offerings, and highlighting existing resources, companies can keep financial stress from overwhelming their employees in the coming months. Employers can also save themselves from losing billions of dollars from lost productivity and voluntary churn.
