Personal debt was a problem for employees before the coronavirus crisis began, and the impact of the pandemic is likely to make this worse. How can HR professionals support employees facing financial difficulties, asks Steve Herbert
The full economic impact of the coronavirus lockdown has yet to be established, but the signals being sent out by the experts are bleak.
Financial wellbeing
The Bank of England has suggested a national economic contraction “faster and deeper” than anything seen for a century, while the Office for Budget Responsibility suggests a 35% economy shrinkage too.
So the reality is that employers will have to resume their post-lockdown business activities in the teeth of a very nasty recession. Yet each and every organisation will want to bounce back to full productivity just as soon as it possibly can.
With this in mind, many HR professionals will be focusing on delivering the most effective format for a safe return to workplace, while also conforming to the government’s Covid-19 workplace guidance. Yet the physical workplace should only be part of that overall planning.
It’s just as important for HR to look at other key issues to help their returning workforce, and one of the biggest unseen challenges might well be the distraction of personal financial worries and how this can damage employer productivity.
Income down, debt up?
Recently published research from YouGov suggests that more than a third (35%) of workers have seen their income reduce since the lockdown began.
Of course this still leaves many – perhaps most – workers largely unaffected (financially at least) by the crisis so far. Yet even these fortunate individuals may soon find their personal taxation burden increasing as the government looks to recover some of the funds used for the most unexpected state bail-out in national history.
So, regardless of personal and employment circumstances, the UK’s working population should perhaps all be prepared for a reduction in their household incomes in the months and years ahead.
Such a decrease in household income is likely to disproportionately hurt households that have already accumulated significant amounts of debt.
It’s worth noting that UK personal debt levels were already extremely high (the Money Charity reports that 12.8 million households have less than £1,500 in savings) even before the Covid-19 storm began, and this figure is likely to have worsened. Indeed the YouGov research has suggested that 16% of respondents had borrowed more during the pandemic.
Is this an issue for employers?
While this might seem like a much bigger problem for the employee than the employer, the truth is that money worries can also impact performance and productivity. Below is a list of just some of the rather alarming facts (compiled by the Financial Inclusion Alliance) that can damage productivity:
- Employees living with constant money worries are five times more likely to have troubled relationships with colleagues at work.
- Employees with money worries are six times more likely to produce substandard quality work than their colleagues.
- Employees with money worries are seven times more likely to have lower productivity or not finish their daily tasks than their colleagues.
- People who are experiencing money worries are eight times more likely to be experiencing sleepless nights that are impacting their state of mind at work and cognitive capacity.
These findings are stark reminders that an employee’s workplace productivity often correlates with their personal wellbeing.
It follows that it is very much in the employer’s interests to provide support and assistance to financially stressed workers whenever and however it is possible to do so.
How can employers help?
Firstly, I would encourage many more employers to establish some formal procedures to provide assistance to employees with money worries.
Howden’s 2019 research found that 96% of employers believed that some of their workers were experiencing persistent money worries, yet four in 10 organisations had no formal procedures in place to support those same individuals.
So employers should look to formulate a plan that will, at the very least, signpost workers towards some practical assistance.
The support offered will vary, but options to consider should include debt counselling services provided by Employee Assistance Plans (EAP), signposting to debt charities, and possibly workplace finance solutions too.
It’s important for all that workers are able to focus on their work instead of worrying about their personal finances”
Overlaying all of these options should be the availability of financial education sessions. In particular, a focus on better budgeting and simple strategies to escape excessive debt are likely to be much welcomed in the months ahead.
The truth is that the coronavirus pandemic represents a huge, rapid, and entirely unexpected change of fortunes for employers and employees alike.
Yet life – and business – goes on for the majority of the nation, and it’s important for all that workers are able to focus on their work instead of worrying about their personal finances.
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It follows that HR professionals should now consider providing financial wellbeing support to assist not just the welfare of their employees, but their productivity too.
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