Financial wellness

Improving your employees financial health improves your bottom line

When employees no longer have to deal with onerous financial and psychological stress, it results in higher productivity, retention, and engagement

6 minutes

2020 was the the year that changed the world.

As a global crisis continues, the South African workforce faces uncertain financial times and in many ways, current global events have accelerated the future of how we should envision financial wellbeing benefits in the workplace.

Here's what we currently know about our employees.

Many employees are:

  • exceedingly spending more than they earn
  • emergency savings, depleting, at a rapid rate (if they were fortunate enough to have any to start with)
  • accumulating very large amounts of debts
  • suffering from financial stress in the workplace leading to poor work and increased absenteeism

As a company it's important to empathise and understand how current events are affecting the financial health of your employees as this affects both team and company performance as well as ultimately, your bottom line. Let's take a look at what current research tells us.

Employees simply don't have enough money to make it through the month any more

2020 was a tough year on everyone. Old Mutual conducted their annual Old Mutual Savings Monitor (OMSIM) survey, this time twice, both pre and post COVID-19 lockdown with over a thousand people. Over 57% of people reported a negative effect on their personal income levels. These would range from earning a bit less, where employees are still earning a salary but were forced to take a small reduction to salary or reduced hours. Many however reported a significant impact on income where a large earnings deduction took place. Some however were even more unfortunate. 8% of people surveyed are now earning nothing at all because they have either been retrenched or their work is no longer providing them with income.

Low income earners (R5000 - R19 999) have been hit especially hard by COVID-19 with 73% of people struggling to get by. This is in part because of a significant change in money coming in with 46% of employees in this salary bracket earning upwards of 50% less than they were before the first lockdown hit.

Employees fortunate enough to have an emergency savings are busy dipping in to make ends meet

The OMSIM survey indicated that 52% of people needed to dip into their emergency savings during lockdown period as well 23% that needed to cash in investment policies to cover expenses. Even with some having the luxury of an emergency savings, 37% have fallen behind on household bills.

South Africans in general aren't known for their savings abilities. In 2019 only 38% of people had enough money saved up to last them 3 months in the event of a retrenchment or loss of income. Fast forward a year on, and that number has gone down to 26%. But the number we should all be most worried about is the 40% of people that only have enough emergency savings to last a month or less. Consider this fact for a second. For these individuals, if they were to lose their form of income today, in less than 30 days they would have run out of money and would most likely have to resort to taking out a high interest loan to cover expenses.

Employees that don't have access to emergency savings are taking out high interest loans to survive

As a result of a lack of savings or investments, employees are left with a tough choice. Do I abscond on my household bills and expenses,  do I risk being blacklisted for not paying my current existing credits, do I potentially not put food on the table today? Or do I take out a short term, high interest loan to help me get by?

For many employees, the latter is the only viable option. The short term, unsecured lending space is an unforgiving arena. The only person that gains is the entity giving out the loan as the interest rates levied on these loans are predatory at best.

Taking a look at the OMSIM survey results again, the percentage of loans obtained from financial institutions from 2019 to 2020 have more than doubled from 21%  to 43%. The percentage of loans obtained from micro-lenders also more than doubled from 5% to 12%.

The sharp increase in loan uptake is a worrisome trend as this creates a debt cycle that can be very hard to escape. Compound interest might be the 8th wonder of the world if you are in the green, but when you're in the red, it's a whole other ball game.

Financial stress is taking it's toll

Taking all the information we've just gone through into account, it's easy to understand why 58% of employees are under overwhelming stress as a result of the anxiety caused by their financial situation.

The American Psychological Association (APA) released a report in 2015 wherein they found that at least 72% of employees felt stressed about money in the last month and 22% were experiencing extreme financial stress. Financial stress, especially at the extreme end of the spectrum, causes the health of our employees to suffer. Several of the above mentioned report's respondents even admitted to skipping work because of financial concerns. Be it struggling to get to work because they can't to pay for transport or being ill as a result of the persistent stress.

Employees experiencing financial stress are also more likely to pick up unhealthy habits or engage in unhealthy behaviours to manage that stress.

You can help take the stress out of employees lives by providing them with the tools to improve their financial health

When employees no longer have to deal with onerous financial and psychological stress, it results in higher productivity, retention, and engagement. Improving your employees financial health improves your bottom line, it's that simple.

Floatpays is a financial wellbeing platform that can be offered as a voluntary employee benefit to your employees that allows them to responsibly access their earned but unpaid wages on-demand should an emergency arise, preventing them from being exploited by high interest payday loan companies as a result of cash flow timing issues.

By empowering your employees to improve their financial wellness, you are reducing the number of employees suffering from finance-related stress. When stress is reduced, your employees have more time to do the things they love. In the end, your employees are your most important asset, and they deserve to be happy and when they're happy, that's good for business.

To find out more on how Floatpays can reduce finance-related stress for your employees, contact us at hello@floatpays.co.za or request a demo from our website.