Financial Wellbeing and its impact on work
Posted 06/02/2023 : By: Kathryn Knight
According to the Chartered Institute of Personnel and Development (CIPD) 2018, 47% of workers face some kind of financial stress, with 16% suffering constant money worries and struggling to pay bills. With recent increases in the cost of living and the impact on housing costs of interest rates rises, it’s easy to see that this has probably become even more problematic.
But why do we need to worry about this at work? Isn’t this employee’s own responsibility?
One of the key reasons employers should be concerned is that people are distracted from their work; in a PWC survey, 46% of workers identified that they spent 3 or more hours a week thinking about their financial worries whilst at work. So it’s no wonder that there has been increased academic research on the subject.
The relationship between financial distress and performance is influenced by several factors, according to the CIPD. These include increased levels of presenteeism, absenteeism and poor health.
Presenteeism is defined as workers that are at work but not working productively in this case, as they are distracted by their financial concerns or using work time to deal with financial issues.
Absenteeism is defined as workers who have to take time off work. In the case of financial distress, this could be the result of taking time off because of stress-related illness or time needed to handle personal finances.
According to O’Neil 2006, the health effects of financial distress are twofold. Firstly financial distress can negatively impact people’s health in terms of mental health issues; those who are suffering with health conditions may experience financial distress as a result of being absent from work. Both of these negatively impact absenteeism and presenteeism.
Financial distress seems to affect different groups of people who require different support. The CIPD identifies the following groups that will have different needs:
- Age is a key factor with middle-aged people who have childcare costs and high housing costs and those in older age groups worrying about retirement
- Those who are separated, widowed, divorced or single tend to present higher financial distress than compared with married individuals
- The more financially educated people are, the less likely they are to suffer with financial distress.
What can employers do to help?
Many firms have started to introduce financial wellbeing policies which aim to tackle financial wellness issues which in turn tackle the problems already mentioned.
Such policies aim to provide employees with access to a range of things to tackle financial wellness. These include things like access and signposting to financial management advice, financial education, credit counselling and debt management programmes, signposting the range of financial benefits to staff such as pensions, health plans, discounts, childcare vouchers, cycle-to-work schemes, employee loan schemes and advances to name but a few. Evidence on the effectiveness of such schemes is limited, but Prudential invested heavily in a scheme in 2009 which resulted in a drop from 31% of staff worried about finances to just 15% a year later. This, in turn, has a positive impact on the negatives associated with employees suffering from financial distress.
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