How does financial stress affect job performance?

Productivity is regarded as one of the most important factors to achieving success as a firm. That is one of the reasons why so many studies have been conducted concerning workplace productivity.

While productivity has a lot to do with knowledge, expertise, goal setting and other traits identified by the Harvard Business Review and other researchers, productivity can be compromised by different factors.

One factor that affects productivity and work performance more than any other is stress, specifically, financial stress.

It is important for leaders to understand how financial stress affects their workers and what can be done to correct it.

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What is financial stress?

Financial stress is “the constant worry about meeting financial goals.” This definition can be re-written as ‘the persistent thinking of how to achieve financial targets.’ In other words, how do you as an individual make sure your financial needs and/or wants are met?

Over 550 million working days are lost each year to absenteeism across Europe. While it is easy for employers to blame it on laziness, incompetence or some other character flaw, the leading cause of it is?stress.

The?European Agency for Safety and Health at Work?found that the total cost of stress on the European economy is 600 billion euros per year.

Of the many causes of stress, the most common is financial stress. A study revealed that 55% of employees in the UK said that financial pressures affect their ability to work effectively. The study also showed that 70% of the UK work force spends a fifth of their time worrying about their finances, costing the economy about ￡120 billion annually!

Given how widespread the problem is, it is apparent that financial stress is not merely the result of not being paid enough. Instead, it has a lot more to do with financial literacy, financial resilience and the host of other skills most employees are lacking.

But before we get to the solution, we need to further understand the problem.

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How does financial stress impact job performance?

1.???Time spent worrying: the statistic above shows that nearly three-quarter of the workforce miss out on nearly 2 hours of work per day worrying about finances.

This lost productivity has been shown to cost about 5.7% of the UK’s GDP. 5.7% is not a small figure, especially when considering that in 2020, Tesco only made a 1.25% net profit margin.

Moreover, even smaller companies would be in a stronger position if their revenue increased by an extra 5.7% in a given year, especially a year like 2020.

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2.???Absenteeism and tardiness: absenteeism has been shown to be an effect of financial stress through loss of sleep. This is because one of the results of stress in general is insomnia, and financial stress is not exempt.

Employees facing financial stress have been known to miss twice as many days of work as their colleagues. But even when they show up to work, they may still be absent.

In many cases, the workers show up late. While it is easy for employers to penalise tardiness, there is an underlying problem that needs to be addressed. If it isn’t, other more problematic consequences may arise.

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3.???Physical health problems: stress is notorious for its ability to cause physical health problems. Financial stress, in particular, can cause health issues like hypertension, heart ailments and headaches amongst other illnesses.

Unfortunately, this further worsens the cycle as the physical distress means more money spent on healthcare or recuperation. These workers will also need more sick days. However, if the company does not offer sick leave, then the employees will be affected by ‘presenteeism.’

?Both sick leave and presenteeism will leave the company in a bad financial state. But what is even worse for the employee is that if not treated properly, the illnesses could lead to loss of life.

It is imperative for companies to find a solution to this.

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4.???Poor concentration: financial stress can lead to employees not being focused on their work. For example, this can lead to the employee using work hours to search for ways to alleviate the financial predicament currently faced, and this is in a safe environment.

In a naturally dangerous working environment like a steel mill, a lack of concentration can directly lead to loss of lives if a single mistake is made. Results like that will be catastrophic and the damage immeasurable.

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5.???Bad synergy: an ill-tempered person does not make for good company, more so if it is an unavoidable person like a colleague working in the same team or a boss. Financial stress can bring out the worst in individuals as it can make them irritable, rude or even violent.

This brings about an unhealthy work environment resulting in bad synergy. This will lead to inefficiency due to unhealthy communication, and lower cooperation levels.

What can companies do to alleviate financial stress?

As easy it may seem to throw money at a problem, this is not a lasting solution. As long as employees keep repeating the bad habit of getting into debt, ignoring their pension contributions and living beyond their means, the salary they earn would never be enough.

The only tangible solution is to provide financial wellness benefits in the form of education – live or online classes – and access to financial advisors.

Financial education has been proven to reduce stress, absenteeism, tardiness and ill-health. It has also resulted in a happier, more productive workforce, according to a study by Prudential.

The pandemic may be coming to an end, but financial stress is still a major problem that needs to be dealt with, today.