Stuck in a Web of Debt

It’s their debt but it’s your problem.

To put it bluntly, financially stressed employees are destroying your bottom line.

Research even quantifies the cost to businesses – as much as $14,000 per year, per financially stressed employee. With up to 20 percent of employees in any organisation likely to be suffering this pressure, that’s a major cost. Considering this research dates back to 1999, pre-recession, these figures are likely to be much higher.

With some of New Zealand’s largest organisations employing up to 10,000 people, we are looking at huge costs. Taking a conservative view, let’s consider 20 percent of employees are under financial stress. These organisations are looking at up to $28million being lost from their bottom line. This is due to loss of productivity caused by financial stress-related absenteeism and to distraction at work. Indeed, research shows that since 1995, absenteeism due to financial stress has increased by 300 percent.

Financial stress is not limited to those on low salaries. I am seeing people from the mailroom to the boardroom spending more money than they earn. Increasing pay or providing bonuses to ease their pressures only worsens the problem – as my father used to say to me, there is no point wiping away the cobwebs; you have to get rid of the spider. In this case, we’re talking about severe financial illiteracy.

I have seen that in people with poor financial literacy, extra money provides them with permission to increase their standard of living, not to become smarter about how they manage their extra money. The result is that they end up chasing their tails and getting into even heavier debt and stress.

Unfortunately, good or bad, the way our society operates means that everything relates back to money. Our financial woes or achievements flow through to all aspects of our lives from our health and our relationships to our work life.

So, for those employers and HR professionals who consider employee financial issues to be outside the scope of what an employee benefits package should include, I would suggest that the research results, coupled with the economic climate, warrants some new thinking on the topic.

One of the most effective ways to deal with the problem is to provide employees with opportunities in the workplace to improve their financial literacy. In my experience, this surpasses all other staff benefits in terms of uptake – and research supports this, with figures showing more than 55 percent of employees want to be smarter with their money.

One of the most efficient ways to enhance employee financial literacy is through outsourcing professional financial management training. Completing this training is not only empowering for the employee, providing relief and solutions in their personal life, but also engendering higher levels of commitment and engagement to their workplace.

While financial literacy training for employees is not the answer to overall business success, it is a very viable way to address poor productivity in the workplace. A financially literate employee is not stressed and it makes sense to assume that with their newfound financial management skills, they are likely to bring other benefits to your business.

Hannah McQueen

www.enableme.co.nz