A new employee group has begun showing up vividly on employer radar screens. It’s not defined by race, religion, gender, or any of the other familiar legally protected classes. The new group commanding the attention of employers is made up of workers suffering extreme stress brought on by extreme debt.
It’s always been in an employer’s interest to provide help to employees suffering the various stresses of life – health woes, family strife, and certainly financial distress – but the economic trouble of recent years seems to be taking a special toll on productivity.
Young employees saddled with exorbitant student loans are a notable subset of employees stressed over debt. A recent National Public Radio report profiled the case of a 30-year-old woman who graduated from the University of Pennsylvania with bachelor’s and nursing degrees and one more thing – $140,000 in student loans. She’s now employed and making more money than her parents (a school bus driver and a teacher), but she expects to be in her 50s before her loans are paid off.
Of course it’s not just the young coping with debt stress. Workers nearing retirement age experience stress over the effect of the recession on their nest eggs. Workers between the youngest and oldest have their own worries including how they’ll finance their children’s education, medical expenses, their retirement savings, and other living expenses.
Debt stress and productivity
With stress over debt a problem for employees in various stages of life, a key question for employers is: How much does employee stress over debt damage productivity? A 2011 survey from the Society for Human Resource Management (SHRM) indicates the answer is quite a lot.
When asked, “Do personal financial challenges affect overall employee performance?” 83 percent of the HR professionals surveyed indicated that they see employees’ personal financial challenges having an impact on performance.
What are all those employees worried about? Forty-nine percent of the SHRM respondents said the personal financial challenge that affected employees at their organizations the most was a lack of funds for personal expenses. Thirty-five percent named medical expenses as a significant challenge for their employees, and 26 percent named the need to save for retirement.
How are employees addressing their challenges? The SHRM survey indicates a good many are dipping into retirement savings. Seventy-two percent of the respondents said that they agree or strongly agree that their employees were more likely to dip into employer-sponsored retirement savings plans in the previous 12 months than in earlier years.
What employers can do
John Jones, a financial counselor with ComPsych, a major Employee Assistance Plan (EAP) provider, says that about 90 percent of employers using ComPsych services are now including financial and legal guidance. Those services include unlimited phone counseling and lunch and learn seminars (in person and via webinars) on topics ranging from saving for retirement or college to maintaining a simple budget. ComPsych also provides online information, tools, and calculators to help employees become better at managing finances.
Like the HR professionals responding to the SHRM survey, Jones sees employees tapping retirement plans early to cope with financial problems. He says in the past 12 months, “we have seen ‘hardship’ cases increase significantly – about 12 to 15 percent – and those people have typically used up their 401(k) or other savings and are often living paycheck to paycheck.”
The stress employees face definitely hurts employers, Jones says. “When employees call us to get help with financial and legal issues, they report saving, on average, 10 hours in time they would have spent worrying and seeking other answers,” he says. “So we know that providing financial guidance to employees really does help.”
As employers try to improve productivity, they’re examining their options to help employees stressed over debt. “Providing financial guidance as part of an EAP is probably the most common option,” Jones says. “Some employers may hire an outside firm to provide financial seminars, tips, etc., but you have to make sure employees are getting objective, unbiased information and that it addresses their main issues, which are usually credit card debt, budgeting, and saving for retirement – in that order.”
Barriers for employers
The SHRM survey asked about the biggest obstacles organizations face in offering financial education to employees. The findings show that among organizations that currently offer financial education, 33 percent said the cost of providing the education was the biggest problem. Twenty-five percent said it was a lack of interest by employees. But the survey found that fewer employers encountered obstacles in 2011 – 21 percent – than in 2009 – 33 percent.
Obstacles to offering financial education are having an effect, though. Fifty-two percent of the employers responding to the 2011 survey said they offer some kind of financial education, down from 64 percent in the 2009 survey.