A third of UK workers are living payday to payday, according to research from Willis Towers Watson, prompting higher levels of anxiety and depression.
WTW found that 36% of workers have no spare cash for emergencies or unexpected payments, while 26% believe they are struggling financially.
Despite a growing shift among employers to support financial wellbeing, 44% of employees surveyed by WTW experienced some kind of financial “shock” in the past two years, indicating this support may not be cutting through.
Financial shocks included a sudden reduction in their working hours, significant medical expenses or being a victim of fraud.
Around a third of those who had experienced this were not able to pay their mortgage, rent or utility bills, the same proportion were planning to retire later than expected, and 29% took a salary advance.
Many employers underestimate the impact of financial struggles on workers’ ability to be engaged and productive according to WTW. It found that those who are struggling financially are three times more likely to suffer anxiety or depression than those who are not – more than two-thirds (68%) of employees reported mental ill-health who are experiencing financial issues.
Older workers between the ages of 58 and retirement were most likely to have high financial wellbeing, with 77% reporting this to be the case. Only 28% of ‘Gen Z’ workers – born between 1997 and 2012 – reported positive financial wellbeing.
WTW also found a link between financial problems and employees’ lifestyle behaviours, with people living payday to payday twice as likely to smoke or have “poor eating habits”. Over a quarter (26%) of those with financial issues admitted they drank too much alcohol.
Stewart Patterson, director of LifeSight, WTW’s defined contribution master trust, said the rising cost of living was impacting people’s personal and professional lives, but employers were becoming more aware of ways they could help.
He said: “There is greater appreciation from employees with financial difficulties that their employer recognises the financial challenges faced by some in the workforce and the impact this can have, and that employers are trying to provide help in this area. The use of financial wellbeing apps, tools and support can provide real help for employees that need it the most.”
Two in five employees think that financial apps and tools should be a core part of employee benefits, while 52% felt that resources and initiatives provided by their employer had improved their financial situation, WTW said.
A number of employers have recently announced one-off cost-of-living payments in a bid to support employees, including Lloyds Banking Group and law firm Irwin Mitchell.