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Why HRs Must Address Employee Financial Wellbeing Now

8 May 2024 4 min read

The burden of financial stress weighs heavily on many employees, impacting their financial wellbeing. This persistent worry, like a weight pressing down on their shoulders, steals focus and drains energy day after day.

This is the harsh reality for a growing number of employees across all industries. Behind the professional facades, people are filled with dread over bills, debt, and lifelong Financial instability.

For too many, financial instability goes beyond a personal struggle. Financial stress has breached our office walls, permeating every department, team, and position. It’s ravaging engagement, fueling absenteeism, and choking innovation and output.

But it doesn’t have to be this way. The time has come for HRs to move financial wellness initiatives from “nice-to-have” to “need-to-have”.

As an HR professional, you can no longer ignore the reality that employees’ financial health is inextricably tied to organisational success.

Financial Well-being to Employee Wellness and Absenteeism

Many studies have shown a clear link between financial problems and poor health. Financial stress can disrupt the body’s stress management system and negatively impact an individual’s overall health perception. These health issues can then spiral into decreased work performance and more missed workdays.

The connection between financial and overall well-being is like a two-way street, potentially trapping people in a harmful cycle. The stress of financial difficulties directly affects mental health. On the other hand, long-term mental and physical health problems can hinder an employee’s ability to work effectively, leading to lower income and worsening their financial situation.

This cycle is evident in studies1, such as one on smokers. Financial stress made it harder for them to quit smoking, which kept them stuck in a loop of financial and health struggles.

Furthermore, financial stress increases the likelihood of absenteeism. This can present in various ways, from needing time off to manage finances to experiencing emotional exhaustion and stress-induced illnesses. A significant study2 found that financial stress led to increased absenteeism, with affected workers reporting more personal leave days.

Impacts on Work Performance

Financial instability goes beyond personal well-being and absenteeism; it significantly impairs work performance.

One of the major concerns is presenteeism, where employees are physically present but underperform due to financial worries or personal problems. These worries can become distractions, leading them to address personal finances during work hours or simply be preoccupied with financial stress, hindering their productivity.

Research confirms this link. A study3 revealed that nearly a third of employees with reduced productivity also reported financial stress, with women disproportionately affected.

The 2008 global crisis further exemplified this. During that time, innovative industries saw a decline in both the quantity and quality of patents. This decrease was more significant among workers with less financial security and limited job opportunities, highlighting the substantial impact of financial concerns on creative output and productivity.

Recommendations for HR Practices

The strong connection between financial wellbeing and employee performance highlights the importance of HR professionals taking deliberate steps to address this issue. Integrating dedicated financial well-being programming into existing health and wellness frameworks can be highly beneficial.

Understanding the complex relationship between financial health, mental well-being, and factors affecting work performance, such as absenteeism and presenteeism, empowers HR professionals to champion and implement effective strategies.

These initiatives not only address a significant concern within the workplace but also contribute to a broader societal and political challenge, further solidifying the crucial role of financial well-being in HR practices.

Here are some recommendations for HR practices:

Financial education workshops: Provide employees with access to educational resources on topics like budgeting, debt management, and saving for retirement.
Financial counselling services: Offer personal financial advisory services to employees, either on-site or through partnerships with external providers.
Employee benefit programs: Explore and implement employee benefit programs, such as financial wellness programs, and emergency savings accounts, etc.

Conclusion

Financial stress is an issue that profoundly impacts employee well-being and workplace productivity. As an HR professional, you have both an opportunity and an obligation to address this growing concern.

Strategic partnerships with personal finance advisors like Finance 1 can equip HR to provide customised financial counselling to employees. By collaborating with our Qualified finance advisor in areas like budgeting, debt management, and retirement planning, we can offer our people the tools and guidance needed to take control of their financial lives.

Together, we can build a future where financial stress no longer hinders the health, humanity and excellence of our people.

Please note,

The views in the article /blog are personal and that of the author. The idea is to create awareness and not intended to provide any product recommendations.