How employers can alleviate employee financial stress

Financially stressed employees are less productive and far more likely to experience mental health troubles. When a pay rise might be unrealistic, what can employers do to help?

Finances and mental health go hand in hand. Research has demonstrated that people facing financial troubles are twice as likely to suffer from mental health challenges. The trend operates in the opposite direction, too, as people with mental health challenges are twice as likely to be experiencing financial troubles.

As economic pressures continue to affect household budgets, employee mental health should be a priority for business leaders. Indeed, 37 per cent of Australians said recent cost-of-living pressures have negatively impacted their mental health while the impacts are only more devastating for certain sub-demographics, such as people with disabilities, caregivers, single parents, and those without tertiary qualifications.

Recently, The HR Leader Podcast had a chat with money and wellness coach Marc Bineham on the connection between mental health and financial wellbeing and the role employers can play in alleviating the burden.

Financial wellbeing

Being wealthy and experiencing positive financial wellbeing are not identical. Wealth is a dollar figure, whereas financial wellbeing is more concerned with the flow-on effects of your wealth and how it is managed.

According to Commonwealth Bank, financial wellbeing means being able to “meet your financial obligations, be financially prepared for an unexpected event, able to save for future goals, including retirement, and having the financial freedom to make choices that allow you to enjoy life – now and under adverse circumstances”.

According to Mr Bineham, one in every two Australians is stressed about money, while the average worker who is experiencing financial stress loses 12 hours of productive work per week. Taken at a higher level, this amounts to economy-wide losses of $67 billion per year, said Mr Bineham.

There’s a pernicious trend among people’s financial stress dubbed an “emotional hot state” in which the individual, paralysed by stress, becomes less able to make clear, sound judgement – often resulting in adverse or unproductive financial decision making. In other words, we experience mental decline due to financial pressures and, labouring under the mental decline, we are prone to worsening our financial situation.

Clearly, breaking the cycle can be difficult. It’s, therefore, crucial that employers find ways to help their employees.

The role of the employer

Asked how employers can help, Mr Bineham was quick to stress that financial burdens can be alleviated in ways other than simply raising pay.

“Actually, from an employee’s point of view, it’s not about getting more money. It’s about [extracting] more value,” Mr Bineham said.

When it comes to non-salary assistance, there are many steps employers can take. So long as they are first acknowledging the problem.

“First of all, you’ve got to recognise it is actually a problem. There’s no question that we’ve seen, especially since COVID-19, how much mental health is [being acted upon] in the workplace,” said Mr Bineham. “This is just an extension of that.”

1. Train the trainers

A crucial step, according to Mr Bineham, is “training the trainers”. In other words, HR professionals should be trained specifically to deal with the pressures unique to financial stress.

“Yes, people can go and get the information on the internet, but if they can actually get trained on this particular subject, just like I know there are now mental health first aid courses that HR teams can do – this can provide employees with the tools and resources to help, as well as telling them where to go to if they need further help,” explained Mr Bineham.

2. Offer financial resources

According to Mr Bineham, more and more employers are offering internal financial training services – whether in one-off instalments or through ongoing online resources offerings. Instead of leaving it to the employee to go out and find a financial adviser, employers can, and are, building financial wellness into the framework of employee wellbeing initiatives.

“There’s a disconnect between what employers think their employees want and what they actually want,” he explained. “I’ve seen over the past 10 years, particularly in America but also Australia, employers are implementing [these programs] in their workplaces.”

3. Educate

The extent of financial concern between an employer and employee can extend beyond pay and super, according to Mr Bineham. For younger employees, in particular, superannuation is hardly front of mind amid ongoing interest rate hikes and other cost-of-living pressures.

“Whether it’s through an enterprise bargaining agreement or even just off the back of their superannuation, a lot of employers have resources from their default fund, and they can just expand that beyond superannuation.”

“So, I think getting people to understand money better, how to save better, how to get them control of their debt … So it’s not one size fits all, but absolutely employers, if they can actually recognise there’s a problem, they can look at how they can build resources into their workplace agreements.”

The transcript of this podcast episode was slightly edited for publishing purposes. To listen to the full conversation with Marc Bineham, click below: