Financial stress is a growing concern that significantly impacts employee wellbeing. It’s the feeling of worry, anxiety, and pressure related to personal finances, encompassing a wide range of issues like debt, insufficient income, unexpected expenses, and difficulty meeting financial obligations. This stress can seep into the workplace, affecting employee performance and health and their overall quality of life.

A study published in the International Journal of Environmental Research and Public Health found a significant association between financial worries and psychological distress among adults in the US. Higher levels of financial worry were linked to increased levels of psychological distress, highlighting the mental health impact of financial strain.

When employees are preoccupied with financial worries, their concentration and productivity can suffer. They may find it difficult to focus on tasks, leading to errors and decreased efficiency. Absenteeism may also increase as individuals grapple with financial issues or seek additional employment to supplement their income.

Financial stress can take a toll on both mental and physical health, triggering anxiety, depression, and sleep disturbances. Employees experiencing financial strain may also engage in unhealthy coping mechanisms such as overeating or substance abuse.

The effects of financial stress can also impact workplace morale and relationships. Stressed individuals may be more irritable, withdrawn, or prone to conflict, creating a tense work environment. You may encounter employees who may be physically present but are mentally checked out.

Also Read: Fatigue vs productivity: The hidden cost of overwork

Strategies to tackle financial stress at work

The pervasive nature of financial stress demands a proactive and multifaceted response from employers. Leaders must actively engage in creating a supportive environment that empowers employees to take control of their financial wellbeing. This not only benefits the individual but also contributes to a more productive, engaged, and resilient workforce.

Here are some actionable steps that HR leaders can take to help teams build their strategies for tackling financial stress and improving employee wellbeing:

1) Understand your workforce’s financial profile

Conduct surveys and focus group discussions to understand the specific financial concerns of your workforce. What are their biggest stressors? What kind of support do they need most? This will allow you to build strategies that are specifically tailored to your team’s current and future needs.

Remember to ensure anonymity and confidentiality in these assessments to encourage open and honest feedback. Analysing this data will provide valuable insights to inform your financial wellness programmes and maximise their impact.

2) Offer financial literacy programmes

Not everyone is well versed in handling their own finances. Conducting financial literacy workshops can empower your employees to manage their budgets with confidence and care. While it is ideal to invite external experts, you may have someone within the organisation, specifically from the finance department, to share some tips. You can even research, curate, and distribute educational materials from online resources.

Also Read: Always on? How hustle culture hurts wellbeing

3) Provide access to financial counselling

Some Employee Assistance Programmes (EAP) offer confidential financial counselling services, including debt management and budgeting assistance. You may also want to consider bringing in financial advisors for one-on-one sessions with employees. Partnering with financial institutions or non-profits to provide expert guidance can also work.

4) Promote benefits and resources

Educate employees about 401(k)s, matching contributions, and the importance of saving for retirement. If possible, offer budget-friendly retirement investment plans for employees. Collaborating with partners to offer health savings accounts and flexible spending accounts is also a great way to promote financial responsibility. Promote any other relevant benefits, such as tuition assistance, employee discounts, or financial hardship programmes.

5) Encourage open communication

Create a culture of trust. Let employees know it’s OK to talk about financial concerns. Train managers to recognise signs of financial stress. Equip them to offer support and connect employees with resources. Provide managers with the tools and resources to initiate conversations, offer guidance, and connect employees with appropriate support systems. This proactive approach can help address financial concerns before they escalate into larger problems.

6) Offer competitive compensation and benefits

Ensure employees are paid fairly and have opportunities for advancement by conducting regular salary reviews. Nothing beats financial stress better than a competitive pay. Beyond salaries, offer a comprehensive benefits package, such as health insurance, paid time off, and other rewards that contribute to financial security.

7) Support work-life balance

Allow for flexible schedules or remote work options to help employees manage their time and finances. Encourage employees to use their vacation time to reduce stress and improve wellbeing. Promote a healthy integration of work and personal life by setting clear boundaries and discouraging overwork. This can help employees avoid burnout and maintain a healthier relationship with their finances.

8) Build support mechanisms for financial emergencies

Consider offering programmes that help employees build emergency savings. Explore setting up a fund to provide financial assistance to employees facing unexpected crises. In some Asian cultures like the Philippines’ – when someone in the workforce is struggling with finances due to health concerns or losing a loved one – HR managers mount a “pass the hat” initiative to seek financial support for their colleague.

Also Read: How to build psychological safety at work

Macro view: Will 2025 be a financially stressful year for employees?

The International Monetary Fund projects global economic growth to be around 3.3% in 2025, with advanced economies experiencing a slight acceleration and emerging and developing economies seeing a modest slowdown. This growth, however, is still below historical averages, indicating a continued period of subdued economic activity.

Inflation is expected to further decline to 4.4%, offering some relief to consumers. But the cost of living remains a pressing concern, as essential goods and services continue to outpace wage growth in many regions. This persistent pressure on household budgets contributes to financial stress and anxiety for individuals and families worldwide.

Adding to these challenges are high levels of debt, both at the individual and national levels, which can limit spending and investment. Geopolitical risks, such as ongoing conflicts and trade tensions, also loom large, creating uncertainty and potentially disrupting economic activity. The increasing frequency and severity of climate-related disasters pose a significant threat, causing economic damage and disrupting livelihoods.

Navigating these complexities requires careful planning and proactive measures. This means recognising the impact of these global economic conditions on their employees and taking steps to alleviate financial stress. By building a culture of financial wellness, providing resources and education, and offering support, companies can empower their workforce to steer through these uncertainties and build a more secure financial future.