Key takeaways:

• The real impact of employee financial stress on your business. 
• Understanding the sources of financial stress among employees. 
• How to manage employee financial stress in the workplace?

Did you know that financial stress is associated with up to three times the likelihood of anxiety attacks, four times higher likelihood of depression, and can inflict significant long-term harm to our body? This stress follows millions of Americans in the workplace, where an estimated $500 billion is lost annually to lowered performance, absenteeism, and higher turnover.

Stay with us as we delve into the true cost of employee financial stress and explore effective ways that employers can manage this issue. 

The True Cost of Employee Financial Stress

Financial stress among employees can have far-reaching effects on their overall performance in the workplace. A commuter facing a $250 car repair bill may find the expense tolerable the day after payday, for instance, but may not the day before. This experience is commonly shared, as nearly 80% of workers live paycheck to paycheck, and said that they worry about running out of money before payday on a weekly basis. This stress carries over as they enter the workplace, instead of being able to focus on their work, their attention is split between the tasks on hand and the financial struggles they currently face. 

Employers need to recognize and address these impacts to create a healthier and more productive work environment. Here are some of the ways financial stress affects the workplace:

Decreased Job Performance

Employee financial stress can significantly affect an employee's ability to focus on their tasks, leading to decreased job performance and lower overall productivity. It can create distractions, increase absenteeism, and even contribute to presenteeism, where employees are physically present but not fully engaged in their work.

Increased Turnover Rates

Financial stress can lead employees to seek better-paying opportunities elsewhere to find solutions to their financial problems, resulting in increased turnover rates. Your business might not realize this immediately but high turnover not only incurs hiring and training costs but also affects team dynamics and can disrupt business continuity.

Elevated Healthcare Costs

Employees dealing with financial stress are more likely to experience health-related issues such as anxiety, depression, and other stress-related ailments. As mentioned earlier, it can lead to greater chances of anxiety attacks, depression, and significant long-term harm to employees. As a result, organizations may face increased healthcare costs due to higher rates of medical visits, prescriptions, and potential long-term health consequences.

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What are the Sources of Financial Stress?

Research shows that it’s the unforeseeable emergency expenses—and it’s financially-inconvenient timing—that often result in employees’ financial stress. Here are the common sources of employees’ financial crises. 

Low Wages and Inadequate Workplace Benefits

Employees who feel underpaid or struggle with inadequate benefits might face difficulties covering essential living expenses, eventually leading to financial stress. Employers should regularly review compensation packages to ensure they align with industry standards and consider additional financial wellness benefits like flexible pay, to match the growing needs of employees. 

Debt and Financial Obligations

Huge amounts of personal debt, student loans, or excessive financial obligations can weigh heavily on an employee's mind, impacting their ability to focus at work. Offering financial literacy programs, partnering with financial advisors, or providing instant access to their earned wages from providers like Clair, can help them manage their debts and their immediate financial obligations. 

Insufficient Financial Planning and Budgeting Skills

A lack of financial planning and budgeting skills can worsen employees’ financial stress. There are many ways that employers can provide workshops or access to financial wellness education that can teach basic financial management skills. Take advantage of Clair’s suite of financial wellness benefits and educational resources that can empower employees to take control of their finances.

How to Manage Employee Financial Stress?

Financial Wellness Programs

Implementing financial wellness programs can significantly help employees alleviate financial stress. These programs may include workshops on budgeting, debt management, investing, retirement planning, and additional financial wellness benefits that you can offer to employees by partnering with providers such as Clair. 

Flexible Compensation Packages

There is a growing demand for workers who can benefit from using flexible compensation & benefits like On-Demand Pay, also known as early wage access, a financial wellness benefit that allows employees instant access to their earned wages whenever they need. Offering flexible compensation packages can provide employees with greater control over how they receive their pay, helping them better manage their finances, especially the ones that require immediate attention. 

Ready to start offering Clair? Schedule a demo with us and we’ll walk you through how On-Demand Pay can help reduce financial stress among your employees. It’s free for you and free for your employees to use.

Addressing employee financial stress is not only a compassionate approach but also a strategic move that benefits both employees and employers. By recognizing the impact of financial stress and implementing effective strategies to manage it, organizations can create a positive and productive work environment, ensuring the well-being and success of their workforce in the long run.