Seven in 10 people experience financial stress and it's costly for both employees and employers.
Seven in 10 people in the UK and US experience financial stress regularly, according to recent research from EY. What’s more, EY found that half of these individuals face a financial shortfall between pay periods approximately every four months.
With Blue Monday taken place earlier this week and the world still navigating its way through Covid-19, levels of stress and burnout are at all-time highs. Research from the ONS in the UK found that levels of depression doubled last year.
Financial stress is experiencing worry or anxiety about finances to the point there is a physiological stress response. According to the Financial Health Institute, this stress can impact a person’s physical health as well.
Financial stress is costly not only for individuals, but also for their employers. EY estimates financial stress costs employers US$300bn a year through lost productivity.
Employees who are financially stressed are more likely to have to take days off and also find it harder to focus on the work at hand given they have more pressing issues. EY’s report found that financial stress leads to:
On top of this, it found that 20% of employee turnover is attributable to financial stress. This means businesses are losing key skills and knowledge.
Three in four people say when they experience difficulties it has a material impact on their health and wellbeing. This occurs across all income brackets. Nearly one in three of the top quartile earners struggle to meet an expense when it falls due. However, the impact of this financial stress is likely to have more of an impact on lower earners when it occurs.
One of the key causes of financial stress is when a financial shortfall occurs, leaving people short of paying for essential expenses. EY’s survey found that shortfalls occur because of:
When a shortfall occurs, nearly 70% of people have to borrow and pay interest for an extended period of time, with a similar number paying late fees and charges. These charges can further compound financial stress, leaving people in a more precarious financial position.
Technology has advanced to the point that monthly, and even fortnightly, pay cycles are no longer necessary. EY’s conclusion is that the timing mismatch between income and expenses is a problem that can be solved through a tool like earned wage access. Earned wage access helps by offering employees flexible access to money that’s been earned, so that they’re in a better position to create a budget that suits their lifestyles and also have cover incase of emergency expenses.
Using a solution like Wagestream to remove the barrier of waiting to be paid has the ability to not only increase productivity and retention, it can also help companies attract the best talent. Six in 10 people told EY that the offer of flexible income access would positively (or very positively) impact their opinion of a potential employer.
See more about how on-demand pay can help your business.