Dealing with unexpected financial needs is one of the biggest stressors facing workers today. Families are living to paycheck to paycheck, saddled with debt, and forced to choose between seeking medical care and feeding their families. surprisingly, this is not an issue that impacts only households making less than $50,000 a year—studies show that these same problems are burdens for families making more than $100,000 a year.
These challenges have dire consequences on individuals, which, in turn, can spell big trouble for employers. The mental and physical toll financial stress places on employees can drive down employee satisfaction and employee engagement, as data from a new research study shows.
Immediate commissioned a study of more than 1,250 hourly and salaried workers, as well as 200 CEOs and HR leaders to assess their thoughts about the state of individual financial health. This study revealed several trends that employers need to be aware of—here are the top four unseen impacts this study revealed:
1. Financial stress takes a physical toll—and has a negative impact on job performance
The negative impacts of excess stress and anxiety can have a major impact on job performance, draining energy and focus. That kind of worry can disengage employees, and make them more likely to seek new employment. More than 75% of employee respondents stated that financial struggles negatively impacted their physical health, and 80% said it took a toll on their mental health. Considering that 93% of respondents said financial worries had a negative impact on their job performance, it’s clear that addressing this challenge is critical to engaging and retaining employees. Combine that with business costs related to turnover–and costs that may arise from preventable health issues that arise as a result of strained employees deferring medical care, financial stress on employees can soon become a major financial strain on the business itself.
2. Financial challenges impact people at all income levels
Those financial burdens aren’t unique to households making less than the average national income. In fact, households making more than the national average were actually more likely to report that they have faced the need for requesting a pay advance. It may come as a surprise that 24% of those making $75,000 to $100,000 and 26% of those making more than $100,000 have requested pay advances at least six times over the past year. Unforeseen financial challenges, such as large medical bills, partner layoffs, or major household repairs can send seemingly financially stable people into a tailspin. Additionally, people at these income levels are more likely to be at a director level or higher. This means that when these employees face financial challenges, and the mental and physical strains that go along with it, issues like absenteeism and reduced productivity can have a large impact on the functionality of the business.
3. Nearly half of employers don’t have a solution in place to help employees cope with financial stress
Based on our study, it is clear that most employers have overestimated the financial health of their employees, with 40% of employers failing to offer any form of financial wellness tools or benefits to their employees. Even when faced with some of the challenging financial situations that have emerged as a result of the pandemic, employers still seem slow to believe that their employees are suffering from financial challenges. Almost all employers surveyed—87%—think their employees’ financial health is good or excellent. The fact that these same individuals also reported that the frequency of pay requests has risen over the past 12 months reflects the kind of cognitive dissonance that is likely to drive their employees to seek out employers who are more attuned to the struggles they are facing.
4. Employees are looking for employers who offer financial support solutions as part of their benefits package
Our study found that the majority of employees (80%) would prioritize an employer that offers an EWA solution solution over those that do not. EWA solutions allow employees better access to money they’ve earned than predatory payday loans services offer. Unlike a loan, these kinds of solutions allow employees to withdraw their accrued pay before their scheduled paycheck. This kind of benefit is important in helping to mitigate against these challenges. More importantly, employers need to take note if they want to attract and retain staff, since four out of five employees said they’d prioritize employers with this kind of solution sends a strong signal.
All of this data points to a key emerging need: financial support benefits like earned wage access can do a lot to drive employee engagement and satisfaction. Since earned wage access doesn’t work like paycheck advances, employees are able to avoid the added stress that payday loans and their high interest can bring. These kinds of offerings also benefit the business: by doing more to increase employee retention, business can avoid the high cost of employee turnover, which costs an average of 21% of an employee’s salary for most positions. To learn more about how to build an effective financial wellness solution, reach out to Immediate today.
Matt Pierce, CEO and Founder, Immediate