There is an old saying: ‘Money can’t buy happiness.’ This might hold some truth to it, but ultimately, financial wellness plays a big role in an employee’s mental health. In today’s fast-paced and unpredictable work environment, financial wellness has emerged as a crucial factor determining employee mental well-being and engagement. This can severely affect an employee’s personal life and hinder the company’s success in the long run. `This is evident from a study conducted by MetLife, where they mentioned that employees who had financial wellness or were happy with their salaries were found to be happier as compared to people who weren’t happy with their salaries, with 84% and 55%, respectively. Moreover, employee engagement also differed between the employees, at 78% and 53%, respectively.
According to a survey conducted by PWC in 2023, 57% of employees feel that financial instability is the leading cause of stress in their lives. Financial instability degrades sleep quality, self-esteem, physical health, and home relationships. However, the most significant effect is that it hampers employee performance, drains creativity, and lowers employee engagement. Moreover, a survey by the Indian Institute of Management (IIM) Ahmedabad in 2022 found that 60% of Indian employees experience financial stress, with 40% reporting that it affects their work performance. This financial stress translates into reduced productivity. According to a 2023 report by the Associated Chambers of Commerce and Industry of India, or ASSOCHAM, financial stress leads to a 20% reduction in employee productivity and a 15% increase in absenteeism.
Recognising the challenges faced by employees and the effect of those challenges on the company’s growth, many companies have started offering good salary packages. A 2022 Bank of America study concluded that around 97% of all employers feel a sense of responsibility for their employees’ financial wellness, and around 62% said that they feel extremely responsible for their employees’ financial well-being. The report also mentioned that 84% of people believe in offering better employee financial wellness. It was also seen that the employees who were provided the financial wellness tools saw a 50% improvement in their productivity and around 36% in creativity or innovation.
Even after this, the fact remains that in both of these studies, around 60% of employees said that they were stressed about their financial situation. Although organisations recognise this as a big challenge, the execution is still lacking, and it costs these companies a lot of money.
A 2022 report by Salary Finance stated that companies worldwide are losing around $500 billion annually due to decreased employee engagement, productivity, innovation, and creativity. Moreover, employees who are financially stressed are more likely to look for a new job, which affects company turnover rates, leading to increased recruitment and higher training costs. This hurts the company’s image and progress in the long run.
To combat these challenges, organisations worldwide must employ robust strategies and change their approach to employee financial wellness. The aforementioned study conducted by PWC mentioned that 71% of employees believe that financial education will help them manage their finances better.
Several companies have implemented financial wellness programmes and witnessed a positive impact on the productivity and engagement of their employees. For example, SunTrust Banks started a financial wellness programme where they provided their employees with financial education, budgeting tools and personalised coaching. As a result, the company saw a 15% increase in the productivity of their employees and a 21% reduction in employee stress levels, according to the company reports.
Prudential Finance, an American Fortune 500 company, also offers financial wellness programmes that include workshops and one-on-one sessions with financial advisors. The company reported that around 80% of employees who participated in the programme felt confident about their financial future.
However, this is not so simple in the Indian business landscape. India is a developing country, and competition is the name of the game. Due to this competition, companies do not have a large margin, and they pay their employees the bare minimum. This creates an even bigger problem in terms of financial wellness. Moreover, the high cost of living in urban establishments leaves little room for employees to spend their money anywhere else, making it challenging for employees to achieve financial stability. This can only be mitigated by organising financial literacy programs. The government can also play a role by pre-deciding the minimum wage for an employee working in a particular job role.
