Financial Empowerment Isn’t an Employee Perk — It’s a Business Imperative

Today’s post comes to us from UKG Workforce Institute advisory board member Ivonne Vargas Hernandez and it explores the importance of organizations supporting their employees’ financial empowerment and wellbeing.??

During the past year, the consulting firm PwC found that 44% of employees feel that inflation affects their finances , while 59% sought salary increases to keep up with the cost of living. This reveals a situation that is becoming or already is a major challenge for companies: financial stress undermines productivity by distracting employees.??

Debt stress can have negative consequences in a company, impacting turnover, healthcare costs, and employee productivity. Understanding the functioning of money at both macroeconomic and individual levels is crucial to ensuring sound financial management. Financial literacy becomes a differentiator for companies that provide it, as well as a lever contributing to employees’ wellbeing. Financial empowerment is no longer just a perk for employees — it has become a business imperative for organizations to provide employees with essential tools to help manage personal finances, savings, and investments more assertively. However, according to SHRM, only 21% of companies globally provide financial education talks.??

In this economic odyssey, according to PwC, almost half of employees struggle against financial winds to keep their households afloat, while 28% struggle to make it to the end of the month. Financial stress is a dragon that threatens productivity, distracting a third of employees in their work. The consequences of this phenomenon lead to the distribution of money in debts, lack of knowledge about expenses, high housing costs, and the inability to save, among other issues. This stress can lead to employees neglecting other important elements of their wellbeing and health.??

Aside from employees mentioning an increase in stress due to an unfair workload, the fact remains that making ends meet without enough money significantly affects their productivity and results. This can lead to a problem already looming in organizations: presenteeism.??

How Does Presenteeism Manifest in Companies???

Presenteeism is the phenomenon where employees are present at work but not fully productive due to illness, stress, or other causes, which translates into a significant financial burden for employers. It is estimated that this cost amounts to over $3,922 per year for each stressed employee , according to the firm Morgan Stanley. Another significant figure is related to employee turnover, as it is estimated that 40% of it is due to stress, with a replacement cost of 120%-200% of the employee’s salary.??

This economic impact reflects the loss of productivity and efficiency that occurs when employees, despite being in the workplace, are not performing at their maximum potential. Stress management and promotion of emotional wellbeing, including discussions on debt management, emerge as crucial strategies to mitigate presenteeism and ensure a more productive and healthy work environment.??

The link between presenteeism and stress is evident. The latter can lead to that state of “being but not fully engaged in an activity.” Employees, fearful of falling behind or being perceived as weak, tend to show up for work even when they are not well. This vicious cycle contributes to an increase in stress, as they face additional pressure to work while they are sick. Chronic stress can increase the risk of heart disease, cause digestive problems, weaken the immune system, and affect sleep. So, if employees want to better manage stress, they must also feel better about their personal finances.??

How Can Organizations Support Employees’ Financial Wellness???

Companies can play a vital role in addressing employees’ financial stress and supporting their wellness. Offering budget counseling, savings plans, salary-advance options, and contributions to daily expenses are effective strategies to improving employees’ financial wellbeing. Likewise, it is worth noting that workers perceive periodic salary adjustments as more of an obligation than concrete assistance in mitigating financial stress. In this context, there is an opportunity to implement internal financial education and benefit actions, complemented by a salary-adjustment policy. This combination has the potential to generate a significant motivational impact, providing employees with tools and support to manage their finances more effectively.??

Similarly, to address these challenges, organizations must be proactive. Providing resources for stress management, promoting work-life balance, offering support programs, and respecting disconnection from work are key strategies. Furthermore, promoting a positive work culture can contribute to a healthier and more productive environment for employees.??

It is a reality that not all companies are on the same page. According to a survey conducted by SHRM, less than a quarter (21%) of companies currently provide non-retirement-related financial benefits. In fact, these benefits, known as Employee Assistance Programs (EAPs), offer support to workers seeking help with budgeting, money management, and debt repayment.??

We must start from the idea that financial education in the workplace is an investment that can bring significant benefits for both employees and employers. By helping workers reduce their expenses and make more informed financial decisions, then productivity, engagement, and retention can be improved, while also fostering a healthier, and above all, sustainable work environment.?

The ways to provide this support and encourage savings for employees are varied. It can be as specific as facilitating the use of platforms (apps) that concentrate diverse options for exercising and taking care of one’s own and family’s integral health, to creating rewards plans that help employees save on food, technology, and more.??

Additionally, employee referral plans, professional development funds, and assistance in paying for Internet and electricity services (as required by NOM 037 in Mexico, for example ) for teleworkers can be created. The important thing, besides contributing to financial education, is to strengthen or regain the employment relationship with employees , which is not currently at its best.??

After all, the majority (76%) of people in unhealthy employment relationships, where they do not feel seen, consider leaving their current company. That means supporting employees’ financial wellbeing and keeping them happy and productive matters to the financial interests of both employees and their organizations.