Financial stress knows no income boundaries. Bank of America research shows that even among families earning more than $150,000 a year, one in five still lives paycheck-to-paycheck. And because nearly one in four Americans has no emergency savings at all, according to Bankrate, a single car repair or urgent care visit can lead to a debt spiral.
It’s no surprise these stressors are leaking into the workplace, and HR leaders are feeling the effects. In a Purchasing Power survey conducted at the SHRM Annual Conference and Expo, one in four HR leaders shared that employees discuss financial hardships with HR at least once a month.
Financial conversations can be sensitive, but they are important. One employee may be overwhelmed by the start of student loan repayments, another colleague is caring for an ill spouse on one income, and countless others may be silently struggling with their finances, embarrassed and unsure of where to turn for guidance.
As the line between personal and professional challenges continues to blur, it’s important for HR leaders to understand how financial struggles can impact organizations, the signs to look for when an employee is struggling, and how to better support their employees’ needs.
How Financial Stressors Impact Organizations
HR leaders work hard to create environments where employees feel accomplished at the end of the day. But what happens outside of work often determines how they show up in the office the next morning. In fact, a SoFi study found 48% of employees facing financial stress struggle to sleep. More broadly, SoFi reported that one in three employees can’t focus at work because of their financial worries, spending roughly eight work hours a week distracted. For a worker in a high-stress environment, such as a nurse or an electrical lineman, these burdens can threaten the safety of both the employee and their colleagues – or customers – around them.
If left unaddressed, financial stress can ripple across teams. When morale is low, employees are less likely to engage with non-work activities in the office, such as company lunches, volunteer events, and team outings. Additionally, financial stress can also lead to an increase in absenteeism.
Identify the Signs of Financial Stress Before It Impacts Culture
Every employee manages financial stress differently. However, HR can support people managers by educating them on warning signs surrounding financial stress.
The most visible warning sign of financial distress is a sudden decrease in employee engagement. Consider a regularly involved employee, one who helped plan the company Christmas party, mentored junior team members, or served on the welcome committee for new colleagues. If they begin to pull away from extracurricular activities in the workplace, there may be underlying issues like financial stress, especially if they are calling out sick more often than usual.
Monitoring wage activity might also reveal distress. In companies offering earned wage access programs, a rise in frequent withdrawals might indicate that an employee is trapped in a debt cycle. Likewise, early 401(k) or IRA disbursements can be a particularly costly warning sign, and tax penalties can quickly add up. Employees on a SIMPLE IRA plan face 25% penalties above regular income tax if they withdraw in the first two years of contributions, creating long-term pain for a short-term fix.
HR as a Critical Resource
While HR can’t solve every employee’s needs, HR leaders assisting financially burdened employees should look at two approaches to help employees manage their challenges: education and voluntary benefits.
Financial literacy programs provide guidance both to those ready to ask for help and those who might not want to speak up. A PwC survey found 68% of employees who were offered access to financial literacy resources used these services. That could mean introducing workshops on saving, budgeting, or filing taxes, or covering the registration costs for online learning tools – so employees can get the help they need without an uncomfortable conversation.
Voluntary benefits can also help employees bridge financial gaps without taking on high-interest debt. As employee needs have evolved, the range of voluntary benefits has expanded. For example, some companies now offer pet insurance to alleviate the costs of keeping furry family members healthy. Additionally, an employee purchase program allows workers to buy essential goods, such as refrigerators or car tires, with interest-free, fixed payments taken directly from their paycheck.
And for employees focused on upskilling, assistance with online tuition or certification programs can ultimately pay for itself, as the employee brings new skills back into the workplace that improve efficiency and productivity.
Financial Wellness Pays Off for Employees and Employers
Financial stressors can be a silent challenge to productivity. That’s why it’s important for HR leaders to stay attentive to the role financial stress plays in employees’ lives, both inside and outside of the office.
By equipping managers to recognize when employees may need help and offering a thoughtful mix of programs and benefits, HR can create an environment where employees feel supported and are free of financial distractions – ultimately fostering a more productive, resilient organization.
Source – https://www.hrmorning.com/articles/financial-stress-at-work-hr-response/