28 April 2020
By Aamir Devra
Compensation & Benefits, KPIT
The relationship between an employer and an employee is arguably the most complex one of all. At first glance, it can seem fairly standard, in the sense that it is one based on mutual benefit. On a closer look, however, we come across a plethora of factors that may not seem obvious at first.
An employer’s objective is optimal team productivity and performance. Meanwhile, an employee desires, among other things, reasonable compensation and benefits. Despite this seemingly elementary arrangement, employees can often struggle to sustain themselves financially. This isn’t necessarily due to lower wages – but often financial management attitudes that could do with some guidance and improvement. Stress stemming from a lack of financial security and stability manifests itself via direct impacts on overall workplace efficiency.
The biggest challenge for an HR department in 2019, in my opinion, is ensuring optimal workplace performance. This, while maintaining a balance between the organization’s and employer’s interests. In recent years, there’s been a consistent rise in employee welfare and support programs as employers begin to understand the significance of ensuring employee wellness – both physical and psychological. It is, however, critical to look at the financial welfare of employees as well. Despite evolving workplace cultures and expectations, compensation can remain a significant factor and motivator for people and impacts them in many ways.
How Financial Issues affect Employee Performance
Financial issues are widely cited as the most common cause of stress among employees. A look at PwC’s 2019 Employee Financial Wellness Survey describes findings that are genuinely concerning:
Nearly 60% of employees describe financial or monetary issues as the primary cause of their stress.
The survey also highlights that about half of the participants are living paycheck to paycheck, or merely struggling to cover everyday expenses.
What’s truly concerning is that PwC’s report is one in isolation. There have been numerous other surveys with similar results.
On the first look, the lack of financial wellness may seem like an employee issue. However, on a deeper level, the issue is of equal significance for both parties in the corporate structure. A large number of stressed employees are, of course, not a cost-efficient way of doing business. Stress originating from financial matters can lead to some predictable negative results – lack of confidence and morale, absenteeism, health issues and more. All these issues are red flags for employers and require a response on priority.
Another survey of 1,817 working adults conducted by YouGov, cites financial well-being as a crucial component steering employee performance:
One in four workers acknowledges financial issues as one that impacts their performance at work.
One in ten working adults identifies monetary issues as the primary cause behind lack of focus and inability to decision making, while 19% of the respondents are not able to sleep properly due to their financial problems.
Employers may want to see these reports as a wake-up call and begin with steps to rectify what could be an impending crisis.
As costs of living continue to rise, an increasing number of financially unstable employees should not be an entirely unexpected result. While an employer cannot manage finances for individual employees, an employee’s inability to do so themselves can be problematic in some far-reaching ways. Employers may want to establish quality financial guidance and support programs to educate and assist employees in navigating money management tasks. This isn’t an out of the box idea – PwC’s 2019 Employee Financial Wellness Survey suggests about 88% of working adults seek some level of guidance or advice on their financial matters.
Multiple sources of research and surveys on employee financial wellness have offered compelling evidence about the concept’s significance in affecting employee performance. The data sheds adequate light on how deep the relationship between financial wellness and performance is. We must comprehend that ensuring financial stability and security for employees is, of course, an investment in the organization’s success. I’m pleased to see many organizations understanding this and taking some bold steps. I’m confident more will join in.