Lynda Shaw: Employers should understand employees’ responses to financial stress

Most employees cut their cloth according to their earnings, but only a small minority understand how to make their money grow.

If you read nothing else, read this…

  • It is very easy for employees to get into debt.
  • Debt can increase stress hormones, such as noradrenaline and cortisol, and adversely affect ’feelgood’ neurotransmitters.
  • Employers should offer all staff access to financial education.

Most employees think they are doing well if they are in the black, paying into a pension fund and saving for holidays and cars. But these purchases are often made via credit cards or loans with high interest rates.

We live in a society where credit is encouraged, which makes it very easy for employees to get into debt with credit cards, banks and loan companies. 

Many staff do not consider the compound interest or the various charges they will incur with credit facilities, and become highly stressed when they discover that a £2,000 purchase has spiralled beyond their capabilities to settle the debt.

Autonomy flies out of the window when debt walks in through the door, with mental health issues and poor physical health among the possible consequences.

Metaphoric battle

The pressure of such a situation will increase employees’ stress hormones, such as noradrenaline and cortisol, while ’feelgood’ neurotransmitters will be adversely affected. This may result in depression and other psychiatric disorders, probably affecting sleep, memory, appetite and emotions. 

The employee’s cognitive processes will suffer and anyone experiencing financial stress will not be able to think clearly or be efficient in their job.

Clearly, this is something employers must take seriously. Studies show that financial wellbeing leads to greater productivity and improved staff morale, while healthcare costs and absenteeism diminish.

When staff feel in control of their finances, they are more likely to practise self-control in other areas of their lives, such as exercise and healthy eating. This makes them healthier with a stronger immune system, creating a positive environment that motivates them, and others, to want to do well.  

Should employers intervene?

The big question is: how much, if at all, should employers intervene? We live in a culture that does not encourage discussion about personal wealth, or the lack of it. Staff may even consider any financial intervention by their employer as assumptive or patronising. 

But, morally, how can an employer stand by and watch one of its employees go through distress, and how can managers oversee a member of staff who is not performing well?

Managing finances well is empowering for all employees, irrespective of age or seniority, which is why employers should consider offering all staff access to financial education. 

Financial topics

Employers should consider topics such as how staff can set realistic financial goals, the importance of building emergency funds, paying off credit cards each month and even the wisdom of writing a will. 

Financial planning training will encourage all employees to think clearly about their finances, helping to avoid stress in the future.

An open-door policy is a great way for employers to engage with staff, because it allows them to see that the organisation is approachable and understanding if and when issues at home affect their work performance. The result is a more motivated, healthier and productive workforce.

Dr Lynda Shaw is a cognitive psychologist and business improvement specialist