The invisible costs of financial stress

Financial stress has affected a larger group of people in recent years than in previous years. The impact was global, as the pandemic significantly changed job opportunities and the economics of many businesses and families around the world.

Development of financial stress in society

Even before the pandemic, many businesses had already begun to take a serious interest in the financial health of their employees in order to combat employee turnover. And turnover goes hand in hand with the cost of attracting new employees. Already in 2017, 53% of employees were financially stressed, according to a PWC study, with the percentage even higher among millennials. It is notable that 46% of workers reported thinking or solving their financial problems for 3 hours a week during working hours. For companies, the logical question is how much employees would have done in that time.

Let’s fast-forward to late 2020, when Immediate conducted a similar survey of US employees. This showed that the vast majority of people experienced an unexpected expense during the year. There would be nothing special about that, because we all experience unexpected expenses. It is worse when it is a narrower set of so-called. necessary expenses, i.e. expenses that people consider necessary for running a household. Here it turns out that most people use a credit card (i.e. borrow from a financial institution) and slightly fewer people borrow from relatives or friends. By the way, the profile of users in the Czech Republic is very similar – only people don’t borrow via credit card, they borrow directly via consumer credit.

Another year later, in 2021, a full ¾ of employees were already concerned about their financial stability, according to Immediate. The uncertainty in the overall economy has hit workers very hard. Companies were closing completely or temporarily and this logically had a big impact on workers. It is noteworthy that even in the middle and high income groups, this concern prevailed among more than half of the workers. This is related to the fact that the middle class, this pillar of the economy, has become very insecure.

The impact of financial stress on employees

More than 75% of employees surveyed say their financial problems have a negative impact on their physical healthwhile 80% say they have a negative impact on their mental health. This is of great concern not only for the health and well-being of employees, but also for employer outcomes in terms of healthcare costs and reduced productivity.

In the US, the impact goes much further, with employees there reporting that they are delaying healthcare, treatment or even surgery due to financial difficulties. Fortunately, this is not a threat here in our latitudes thanks to health insurance.

This is evidenced by the large majority (93%) of employees who say financial problems affect their job performance, with more than half (55%) saying it happens often or very often. In addition, 56% say that financial worries affect their attention at work often or very often.

This provides an opportunity for companies to empower their employees – by reducing their stress, breaking cycles of unhealthy debt and helping them to perform better at work. As financial health becomes more and more prominent, 60% of employers in the U.S. provide some form of financial comfort to their people in the form of education, counseling, or outright services that reduce financial stress. Here, too, we are in contrast with Europe, but this time in the opposite way to the case of health insurance – the financial health of employees is still in its infancy.

And that’s not all.

In the US, the typical payroll cycle is weekly, while in Europe it is monthly. What about bills and family expenses? Of course, these are ongoing and do not take your pay date into account.

The impact of financial stress on employers

Surprisingly, the offer of higher earnings and rewards is winning out over employee safety, despite the pandemic. This may be one of the reasons why 39% of employers say it takes longer to fill vacancies, and around a third (32%) say competitor offers make it harder to find quality employees. In addition, more than a quarter of them say they are spending more on recruitment through paid advertisements, sign-on bonuses and using talent agencies. How much it will cost is a matter of differing opinions. But we can rely on data from Eurostat and other agencies – according to them, it costs about €3,000 to find and train a new worker in Europe. Recruitment allowances in the Czech Republic have also been rising recently. The normal contribution is nowadays 75 thousand crowns, the complete exception is not about 150 thousand crowns. With an average EU turnover of around 20%, this is a significant expenditure.

According to the study. Immediate – The unseen costs of financial stress in the workforce, 2021 prepared by Jan Müller


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