Poor financial behaviour can impact negatively on family life and affect the ability to obtain credit for essential goods and services. What one doesn't often realise is that financial stress experienced by employees can also manifest itself in a multitude of ways in the workplace - all of which take the employee's mind and body away from work and ultimately could jeopardise their job - the primary source of their income.
Often, financial troubles follow employees to work, posing a substantial financial and operational risk to the business and its brand. While employers are not responsible for employees' financial behaviour, businesses do end up paying in other ways for their employees' indebtedness. Higher rates of absenteeism, reduced productivity, lowered morale and the loss of customers who seek better service are just a few examples of how an employee's financial troubles might affect a company's bottom line. In severe instances studies have shown, a company can see an increase in theft, aggression and termination of employment due to employees being overwhelmed by their financial situation.
In a recent case study conducted by TransUnion, 5200 anonymous employees across 12 divisions of an organisation were sampled to measure employees' level of financial stress and vulnerability. The credit histories of these individuals were compared with that of the South African credit active consumer. The results showed that close to one-third of the company's employees were experiencing some level of financial distress compared to the South African population.
Dr. T. Garman's 1996 study entitled, The Negative Impact of Employee Poor Personal Financial Behaviours on Employers, cited that between 13%-25% of employees experiencing financial distress will spend office hours dealing with personal financial matters. To measure this impact on the bottom line, the study took those same employees and calculated the amount of work hours spent managing personal financial matters as time lost to the company, estimating that more than R4,5 million* is potentially lost each month due to employee financial anxiety. This does not take into account the cost of absenteeism due to financial distress, it is estimated by OCSA (Occupational Care South Africa) that absenteeism in the workplace costs the South African economy around R12 billion per year.
Interface, a leading employee financial wellness solutions provider in South Africa, has seen an increase in employees seeking face-to-face appointments to discuss their personal finance concerns, such as managing budgets and understanding credit reports.
“People are worried about losing their jobs due to the recession. They also realise that their performance is deteriorating because they cannot get a handle on their finances. However, the good news is that there has been a marked increase in HR departments looking for life skills training for their workforce. More companies need to start following this trend,” comments Valerie Leeming, executive director of Interface.
Employers can invest in tools to measure and monitor employee financial stress and this, combined with customised training interventions, could have a dramatic impact on the company's bottom line. Allocating funds for support programmes as opposed to losing time and profits through decreased productivity is one way that companies can reaffirm their commitment to employee wellbeing and the continued growth of the business. When companies take the steps to empower their staff with the tools to create healthy finances, individual productivity and focus increases because of the feeling of being valued and prioritised.
“You cannot force someone to take control of their finances - the same way you cannot force someone to seek help for an addiction - but individuals are more likely to tackle the problem when provided with the resources, than without them,” remarked Leeming.
Recent infrastructure and capacity investments are enabling TransUnion to implement a drive towards greater consumer and employee focus through Employee Assistance Programmes (EAPs). These programmes concentrate on financial health, work to educate the public about smart financial choices and demystify credit myths to encourage positive financial behaviour. It is practise that human resource recruitment policy may require the use of credit bureau data to assess the financial standing of employees as and when required dependant on the terms & conditions of their employee contract. As a result, personal finance education and training is greatly needed to better equip consumers to apply for and retain positions of this type. TransUnion has adopted this innovative approach as a solution to minimising financial stress.
TransUnion works in partnership with Interface to execute another corporate EAP focused on creating awareness of ones credit report and understanding the information it contains. Through the newly launched www.mytransunion.co.za, TransUnion extends its EAP to all consumers.
* Calculation: average salary x percentage of time dealing with personal matters (13%) x no. of employees (1664) / 12 months
