Financial stress in the workplace: let’s talk about it

Financial stress in the workplace: let’s talk about it

Globally, an estimated 12 billion working days are lost every year to depression and anxiety at a cost of US$ 1 trillion per year in lost productivity (United Nations, 2022).

When it comes to the workplace, mental health has become an increasingly important topic in recent years. It is now recognized that employee productivity is directly linked to their mental wellbeing, and companies that prioritize mental health initiatives tend to have more engaged, satisfied, and productive employees.

There are a multitude of strategies, tools and techniques for employers to best prevent and promote and support mental wellbeing for their workforce from wellness days to psychological support and more.

But what isn’t talked about enough is the slightly taboo subject of the role of financial wellness in the workplace.

Now, especially with the rising cost of living, economic uncertainty, and waves of layoffs happening globally, many employees are beginning to feel the stress of finances.

Workplace financial insecurity can be caused by several factors, including inadequate pay, poor investment in career development, and a lack of structure and communication.

• When employees are not compensated fairly, they may struggle to make ends meet and experience financial stress.
• Similarly, when employers do not invest in the career development of their employees, individuals may feel stuck in their current role, limiting their earning potential and financial stability.
• Additionally, a lack of structure and communication around financial matters can lead to confusion, misunderstandings, and uncertainty, further exacerbating employees' financial stress.

It is essential for employers to address these factors and provide support and resources to help employees manage their finances effectively, promote financial wellbeing, and ultimately, increase productivity and job satisfaction.

Of course in a dream world, all companies could do a salary increase or a one time bonus to all employees (or certain employees) so that everyone feels comfortable in this uncertain economic climate.

However, that isn’t realistic for many companies who may not have the resources or those thinking of wage inflation.

But that doesn’t mean that companies should just sit there and do nothing to support their employees financial wellbeing.

We put together an article on our top tips from companies...

Here’s how you can take action to support your employees starting today…

#1 Feedback, feedback, feedback

We sat down with Michael Becher, Chief People Officer at Avi Medical to see what a medical provider itself is doing to support their employees.

What is the first thing that comes to mind when we talk about financial insecurity? 

With the current situation in the world everyone, also our employees, carry a wide range of insecurities not only financially. I think it is very important to be sensitive around this as business but also as leaders.

Financial insecurities can take up a lot of mental space from people they would normally spend on other things. So the impact is not only on them but on the jobs they perform, on the customers and colleagues they interact with and their social surroundings outside of work.

Compensation is something people always address first. May it be because of a lack of transparency, a felt injustice, a poor market positioning of the overall compensation etc. As a Chief People Officer I am in conversation with employees a lot and I can see a clear difference between companies with a transparent and easily understandable reward system and those who do not have it. People talk about compensation and specifically if there is inequity found, employees become frustrated, less engaged and you see an increased risk of attrition.

What are their main actions that you take at avi.medical to support your employees?

• Three times a year we conduct our Engagement survey where next to a lot of different dimensions we are also asking employees about the situation of their wellbeing also connected to the financial aspect to understand the situation in the company
• We have implemented a transparent compensation structure, which everyone in the company has access to. Besides that we decided against salary ranges to remove the burden from employees to negotiate their compensation. Instead we have created per job level different compensation packages people can choose from based on their financial need and risk appetite.
• In addition we have defined a salary minimum which is way above the standards in Germany for the different job roles we have and adjusted our compensation strategy positioning us as a company significantly above the 50th percentile of the market.
• We have amended our benefits structure supporting our employees based on the current needs based on the high inflation rate going on. For example, introduced grocery allowance for people to get reimbursed on parts of the daily food costs.
• Additionally we offer a wide range of flexible working arrangements which helps our employees to connect work and private life way better. This ranges from home-office, remote opportunities towards different part-time solutions for everyone.

What are some hacks that any company can implement to better support their employees mental health?

Health in general of course is multidimensional and there is a big amount of different things business can do to support this. It's a big task and a million things to consider:

• Make sure people stay home and don't work when they are sick, they need rest and will have a negative effect on the company if people feel pressured to work when they are sick
• Employees who moved to a different country are not familiar with the health care system, provide guidance and potentially benefits on health insurances if this is not mandatory in your country
• Mental health is as important as physical health, ensure your offer mental health benefits to your employees
• Transparency around your compensation / rewards strategy and framework creates piece of mind for people, its an easy way to create equity amongst your employees and removes risks of financial insecurities
• Talk about compensation and financials openly in your company that removes stress from people and helps them to understand how to control their financial development

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#2 Transparency in communication

Review, raise process, financial state of company, cutbacks etc. to reduce anxiety of employees.

If you can’t stay up to date with the market trends for compensation, one of the next best thing you can do is to communicate why and when it will change.

Your employees probably have questions, questions that they are uncomfortable to ask or may not know the right person to ask.

They could be watching the news, their bills go up and building more and more stress because they have more and more questions.

By communicating as honestly as you can and giving reassurance, you can support your team in building trust and providing next steps.

Here are some things that you should think about communicating (and why)

• Pay structures: When employers are open and honest about their pay structures, employees can have a better understanding of how their salaries and benefits compare to industry standards and their peers. This knowledge can help employees make informed decisions about their career development, negotiate for fair pay, and plan for their financial future. Employees who feel they are being compensated fairly are likely to experience less financial stress and feel more satisfied with their jobs. When employees feel that their employers are transparent and upfront about pay, they are more likely to feel valued and respected. This can lead to increased engagement and motivation at work, which can ultimately boost productivity and job satisfaction.
• The financial state of your company (including conversations around hiring freezes etc.): Many employees are watching the news and may be feeling nervous. This can be your time to open up and reassure your team of your financial state, where you are going next and what actions you are taking.
• Reminder of the next review cycle and process: This is a perfect time to send to everyone an update about your company bonus/raise/review process (when, how, where, what). By setting your honest timelines, budgets and objectives, it can support your team in feeling reassured and motivated.

#3 Supporting your team isn't just a "nice to have"

Thanks to Nilo.health, for sharing their insights:

What are some HR best practices to support their team during uncertain times? (Feedback, tools, communication, transparency). And how does that inform what you do at nilo.health for your own employees?

• Whether times are tricky financially, your company is going through some kind of major restructure, or even when the world itself becomes confusing (hello, COVID-19!), communication and care for employee well-being is crucial. This isn’t just a “nice to have” for company culture—strong employee mental health makes a huge impact on your organization’s financial position, saving you money on sick days, presenteeism, turnover and more. So it’s super important for HR to take action and work to support their team. Consider things like:
• Regular opportunities for feedback, between leaders and their direct reports, teams, and between individual employees and HR themselves.
• Conduct surveys for anonymous feedback and the chance to check the temperature of your company at large
• Implement easy opportunities to check in, like starting every meeting with the question “How are you doing?”
• Make mental health an open topic of conversation, working to destigmatize issues like stress, anxiety and depression, and ask leadership to live this value and share challenges and vulnerability in order to become role models
• Get professional support if you need it! An employee mental health benefit allows you to offer your team the best support there is. We’re biased, but we’re partial to nilo.health.

Do you have any insights to share on the negative impact of financial insecurity on employees?

Financial stress is the most common cause of stress worldwide, and it has impacts on your employees’ mental and physical health. Financial stress has been linked to heart disease, diabetes, and trouble sleeping, as well as greater levels of psychological distress. It’s even been associated with greater rates of dementia and other age-related cognitive declines. It’s undeniably a threat you need to take seriously.

• The good news is that it’s not inevitable. If you have employees suffering from financial (or any other kind of) stress, you can take action now to reduce their suffering and help them long term.
• “As a trained clinician and scientist, I have witnessed and assessed the meaning of preventative mental health, early interventions, and easy access to psychological care,” Dr Katharina Koch, Head of Psychology at nilo.health explains. “Our approach at nilo.health makes this the reality for employees and our data consistently demonstrates the significant impact of our work on individual's mental well-being, each and every day.”

If you could give advice to a company on how they could better support their employees health - what would you say?

• Very important in our view is to treat mental and physical health with equal seriousness. Mental health has significant consequences, and poor mental health is also linked to a decline in physical health. So make sure that you take your team’s anxiety, stress and unhappiness as seriously as you would a broken leg or heart attack!
• Working to create an open culture that values feedback and destigmatizes mental health will do wonders for your team and your whole organization’s performance, as will introducing an employee mental health benefit. In fact Forto, one of nilo.health’s clients, found that their employees reported a 25-point increase in their mental well-being after introducing nilo.health—and sick days went consistently down.
• There’s power to be found in giving your employees the tools they need to manage their own financial stress and wellness. nilo.health supports this via offering 1-to-1 counseling sessions with leading psychologists who can guide your employees in dealing with their financial anxieties, as well as via a massive self-guided library of lessons and exercises to build your team’s skills. For example, your employees could work on their own financial health by trying out nilo.skills like “Create Your Personal Financial Well-Being Strategy” and “How To Cope With Financial Worries”.

#4 Do NOT assume that employees are financially literate, provide financial education opportunities

We chatted with provider Bippit on their best advices & internal practices...

Why should companies prioritize the financial wellbeing of their employees? It's a personal problem, no?

• Financial wellbeing is a personal responsibility and ultimately owned by the individual, but employers reap significant benefits if they take this seriously. The impact of financial stress on the individual is considerable and affects the quality of their life. Data from 2022 suggests 40% of UK workers feel physically tired or have low energy from worrying about financial pressures, while just under a third (32%) say financial worries keep them awake at night.
• Unsurprisingly, the mental and physical strain of poor financial wellbeing impacts the individual’s performance in the workplace. Over 75% of those with money worries said it affected them at work, according to research from 2019. Being worried about money also affects core organisational metrics such as retention: employees that are severely affected by money worries are more than twice as likely to be looking for a new job (according to data from PwC).
• If we zoom out even further, it’s been a long-term trend that people expect institutions - including employers - to contribute meaningfully to societal improvement. These contributions increasingly shore up employer brand and customer-facing brand. Organisations that do not prioritise wellbeing may find it harder to keep up with competitors that do.

What is the number 1 mistake that you see companies making when it comes to financial wellbeing for their employees? How can they fix it?

• The number one mistake is treating financial wellbeing as a one-time investment or fix. The reality is that every single employee has a financial life made up of their objective financial situation and their subjective relationship with money - and they can both shift on a daily basis based on many different variables, most of which are unique to the individual.
• That means it’s impossible to provide one-size-fits-all solutions: you can’t ‘fix’ people’s financial wellbeing. The only thing organisations can do is provide solutions that empower every individual to make better choices across the two domains of objective and subjective financial wellbeing. That underpins Bippit: we provide personalised guidance from professional financial coaches so that individuals are able to get the insight necessary to take positive action based on their personal circumstances.
• A second - related - mistake is focusing exclusively on the financial wellbeing solution and not the engagement. Ultimately people are thinking about different aspects of money at different times and you must always relentlessly focus on engaging people with the topic in order to drive awareness, adoption and improvement. This is part art, part science. You should choose a vendor that can support you to do this effectively, but a good place to start internally is to map out your cohorts so you can start to produce more targeted, tailored engagement communications.

As Bippit, being a provider yourself, how do you prioritize the financial wellbeing of your employees? And attached to that, what does the role of fair compensation/compensation communication play in your support of employees wellbeing?

• Firstly, of course, every employee gets access to Bippit so that all employees are able to benefit from personalised guidance so they can make better financial choices every day.
• We also have a market-leading pension offering of up to 8% matched and we wrap around this a proactive approach to pensions engagement, spearheaded by our Head of Coaching Sam Holmes. This helps ensure employees are making the best pension choices at every stage of their life by focusing on their overall goals.
• We also think more holistically about the financial wellbeing of our team and complement our offering with things like life assurance from YuLife and Healthcare Cash Plans by Healthshield. These form important parts of an individual’s financial health.
• When it comes to fair compensation and communication, we always advertise our salary ranges, so everyone knows what the range is internally and externally. We also discuss compensation early on in interviews to manage expectations before someone is extended an offer. We also constantly review salaries to ensure they’re reflective of that person’s skills, abilities, workload and efforts. Being treated fairly and respectfully are core parts of employee wellbeing and these measures are designed to ensure this happens throughout the employee life cycle.

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