We recently spoke with a business owner who was struggling with knowing how to help one of his employees. The employee, who we’ll call Joe, came to him asking for an advance on his pay. This was a small business that promoted a supportive, close-knit culture and so the owner responded with heartfelt concern. With a little encouragement, Joe divulged the back story leading to his urgent need for cash.
About 18 months ago, Joe and his wife were shopping for their first home. They found the perfect place. It was in a good neighborhood with a back yard and located near reputable schools for their 3 kids. They purchased the home and fulfilled a life-long goal. They bought new furniture (by charging it to a credit card) and began living their own version of the “American dream”.
As they settled in and the house became a home, they realized there were additional costs that came with homeownership like maintaining the house and yard. When gas prices rose, they felt the pinch as they now had longer commutes to work.
Then Joe’s mother, whom they relied on to watch the kids after school, experienced a series of health problems. This resulted in Joe and his wife missing a lot of work in order to care for her and take her to medical appointments. It also meant having to pay for after school child care. To make ends meet, they began relying on their credit cards more.
Feeling overwhelmed, Joe decided to take out a payday loan to cover the mortgage for one month. He’d heard about these loans but didn’t fully understand the high-interest rates and the fees that came with them. Desperate for quick cash, he thought it would be a temporary solution. However, by the time he repaid the loan, the additional fees left him even more short on cash, forcing him to take out another loan to make ends meet. Before long, Joe was stuck in a vicious cycle of borrowing to pay off previous loans. To keep afloat, he stopped contributing to his employer’s retirement plan, losing out on the compounding interest that could have grown his retirement savings.
It was clear from his stiff shoulders and furrowed brow that Joe was extremely stressed about his situation. It now made sense to his employer why Joe had been more distracted and accident prone at work. As much as the owner wanted to be supportive, Joe’s recent poor performance could not justify a bonus or promotion. He also worried that Joe’s request to be paid early would do little to get him out of the dark financial pit he was in.
If you were Joe’s boss, what would you do?
Unfortunately, Joe’s story is not unusual. Many individuals struggle with managing their personal finances and lack basic knowledge in areas like budgeting, saving for the future, managing debt, and investing wisely.
Consider these startling statistics from PwC’s Employee Financial Wellness Survey conducted in 2023:
60% of employees experience stress about their finances.
59% of employees say their pay isn’t keeping up with the rising cost of living.
28% of employees frequently run out of money between paychecks.
Even among employees who earn $100,000 or more annually, 15% of them cannot make ends meet between paychecks.
The survey also found that the toll of financial stress on employees is extensive. It negatively impacts almost every aspect of their lives, including
Sleep
Mental health
Self-esteem
Physical health
Personal relationships
Unfortunately, for company owners, the strain experienced by financially stressed employees leaks into the workplace. PwC found that employees who are stressed about their finances are more distracted, less engaged, and more likely to look for a different job.
Here, again, are some of their findings:
One in three full-time employees report that worry about their finances has made them less productive at work.
Employees stressed about money are five times as likely to be distracted at work.
56% of those distracted employees spend three hours or more per week at work focusing on their money issues.
The negative impact of employee financial stress on companies can be far reaching. It can lead to higher costs associated with an elevated use of healthcare benefits, increased absenteeism, increased mistakes made by distracted employees and increased turnover as employees seek jobs with better pay. As these factors permeate the workplace it results in a negative work environment for everyone.
Clearly, company owners have an interest in supporting the financial health of their employees. But how?
Our next blog will answer that question. Stay tuned!
Image Credit: Ahmet Kurt with Unsplash
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