Why Financial Well-being of Employees Matters

The cost of living crisis in the developed world has placed immense financial pressure on many, particularly affecting those on lower incomes. In response, some employers have implemented a series of measures such as access to private doctors, nutritionists, sleep specialists, along with a pay increase and financial education programs. Such initiatives highlight the critical need for employers to focus on the overall well-being of their staff, especially those earning minimum wage or lower salaries.

For employers, enhancing staff well-being is not merely a goodwill gesture but a necessity. Studies have consistently shown a strong link between low pay, financial insecurity, and poor mental and physical health among workers. The Health Foundation emphasized that individuals with lower incomes are nearly twice as likely to experience poor health compared to those with higher incomes. The Health Foundation's report further reveals that by 2040, the health disparities between the wealthiest and poorest areas of England will result in a significant increase in serious illnesses among working-age individuals in deprived regions.

Several factors contribute to this health disparity, including poor-quality housing, food insecurity, and precarious employment conditions. Lower-paid jobs often involve more physically demanding tasks, increasing the risk of chronic health conditions such as diabetes and heart disease. Additionally, the COVID-19 pandemic underscored the vulnerability of lower-paid workers, who were more exposed to the virus due to their inability to work from home, unlike their higher-paid counterparts.

Gallup highlights the direct correlation between financial security and mental well-being, noting that financial stress is particularly acute at the lower end of the pay scale. According to Gullup, the likelihood of experiencing significant stress decreases as income rises, stabilizing around $90,000 per year. (Taken from a study published in the Proceedings of the National Academy of Sciences.) This indicates that once basic necessities are met, the direct impact of financial status on health diminishes.

For employers, addressing the financial stress and health issues of their workforce is essential for maintaining productivity and engagement. PwC research points out that financially stressed employees are more likely to be distracted at work, impacting their performance. Similarly, Deloitte's research found a higher incidence of missed work due to mental health issues among those worried about their finances compared to those who were not.

Employers can take several measures to mitigate the adverse effects of financial stress on their staff without necessarily increasing salaries. Financial education programs that teach effective budgeting and saving strategies can significantly improve employees' financial well-being. Helping staff manage their money better can reduce stress and the risk of depression, thereby enhancing overall health and productivity.

Deloitte stresses that improving health among the working-age population is a critical business need, impacting recruitment and retention. Beyond financial education, worker groups like the TUC advocate for better statutory sick pay and addressing the challenges posed by zero-hours contracts. Ensuring decent notice and compensation for shift changes are crucial steps towards creating a more secure and healthier working environment. These measures, combined with a focus on financial education, can help break the cycle of financial stress and poor health among lower-paid workers.