Is financial stress sabotaging workplace productivity?

The financial stress employees feel is palpable, reaching far beyond their cubicles into their bedrooms (56% report sleep issues due to money worries) and relationships at home (40% report problems), according to a PwC survey on employee financial wellness.

In fact, American workers are squarely in a stress mess. With anywhere from 60% to an eye-popping 86% of employees reporting financial stress, a cascade of consequences not only can affect employee peace of mind — it can negatively impact an employers’ bottom line.

Research suggests that today’s worker spends nearly 14 hours a week — more than eight of them while on the job — dealing with financial issues. Financial wellness provider BrightPlan’s Wellness Barometer Survey estimates that these phantom hours of employee productivity are costing U.S. employers $183 billion annually.

Productivity may be reduced. And here’s the kicker: That door is also revolving. According to the same PwC survey, employees who feel financial pressure are twice as likely as their non-financially stressed colleagues to be looking for a new job. And 73% said an employer that cares more about their well-being would be more attractive to them.

So, in review, workers with money woes might not be working 20% of the time they’re clocked in. To add insult to injury, they’re more likely to be one foot out the door.

What’s an employer to do?

A Transamerica report predicts that by the end of 2026, between 40 and 60% of employers will offer their workers a comprehensive financial program. And the other half of employers who don’t? They may face challenges in the quest to find skilled workers, not to mention missing out on leverage to keep the ones they’ve got.

Leaders seem to be dialing into the realities of this specific type of stress and turnover. More than 3 in 4 leaders polled in BrightPlan’s 2024 report said employee financial stress led to higher turnover in 2023 as financially stressed employees left for better pay or better financial wellness plans. Yet 75% of surveyed leaders admit their workplace prioritizes profits and the bottom line over employee wellbeing.

So, while there’s an acknowledgment of a problem, the priority is not to step in to help solve it.

Here, finally, is some hope — and perhaps also a strong incentive to compel employers to address that disconnect. The Career Optimism Index® survey, published by University of Phoenix in March 2024, found that 66% of workers would be more likely to stay with their employer if they had access to more upskilling opportunities.

That’s a potential two-thirds of a workforce that will stay if employers simply help them level up in their skills.

The case for upskilling and other financial wellness measures becomes especially pronounced in view of the high cost of turnover. According to Gallup, the replacement cost of frontline employees is 40% of their salary. This doubles to 80% for replacement of those in technical roles and soars to 200% of salary for leaders and managers. A hidden cost in all of this is the institutional knowledge that walks out the door when an employee resigns.

Bottom line: Employees who are learning and growing may be more motivated, more loyal and less likely to leave.

A dose of reality might be in order for the employer who has read this far and is thinking, “Yeah, but that’s not my workforce. My people are in good shape financially.”

Statistics are not on the side of employers who overestimate the financial health of their workforce. According to the Society for Human Resource Management, 76% of workers are not satisfied with their company’s financial benefits. Yet a whopping 92% of leaders believe their company offers the financial support employees need. Furthermore, leaders estimate that 30% of their workforce is in an “excellent” financial situation. How many employees describe their situation that way? Just 12%.

Rather than make assumptions, employers might do well to investigate employee financial pressure points. For example, employers could use an anonymous feedback mechanism to gauge this type of specific stress.

Additionally, leaders might be encouraged to ask open-ended questions during routine one-on-ones, such as “how are things going in life?” If financial pressures are high, it will likely spill into conversation.

In fairly short order, employers will be armed with empirical data through surveys and anecdotal observations that equip them to form a picture of employee financial health and how to respond.

A largely Gen Z workplace will have different needs than a heavily Gen X employee roster. But whether it’s consumer debt and budgeting needs, concerns about rising costs, or fears about retirement readiness, having an accurate picture of what employees need can help employers start tailoring solutions accordingly.

Financial stress doesn’t just happen overnight. Often, it’s a complex, interwoven result of income level, personal financial aptitude, financial decision-making, educational level and the general state of interest rates, inflation and the economy.

Employers can take several proactive steps within this mix to help employees potentially attain more financial confidence, develop skills and achieve education.

1.    Examine employee compensation packages. Of course, all the money in the world won’t fix poor budgeting or reckless spending. But cash is still king. A regular review of compensation packages (including newer compensation phenomena such as child care assistance, gap insurance for uncovered health expenses and student loan repayment matches) to make sure they are competitive can position a company to attract and retain top talent.

2.    Offer meaningful, personalized financial wellness programs, which might include money management coaching, online tools and retirement planning. Almost 7 in 10 report using these services when employers provide them.

3.    Invest in reskilling or upskilling solutions that help identify employee skill gaps, keep employee skills competitive, and retain and engage valuable employees — especially when these solutions are paired with clear advancement pathways for employees.

4.    Offer tuition assistance to employees. When employees advance their education and learn new skills, they may achieve personal dreams while building company loyalty. For many, higher education is impossible without tuition assistance. According to a University of Phoenix white paper, 85% of adults not enrolled in an educational program cite costs as a persistent obstacle.

In the end, employers who take steps to understand and mitigate employee financial stress may end up having the edge by creating employees who are more loyal, focused and productive in their present workplace and for many years to come.

Financial stress is just one concern today’s employers must address when considering employee retention, well-being and productivity. But they don’t have to go it alone. University of Phoenix offers a suite of resources designed to relieve the pain points in contemporary workplaces and support employee development. Employers who invest in these areas can build a stable, focused and resilient workforce, equipped to perform today and grow tomorrow. Explore Workforce Solutions to learn more.