Financial worry: When should HR step in?

'Our research found that finances are the top source of stress for Canadians in every province'

Financial worry: When should HR step in?

As employers focus on employee wellness and how to prevent and manage mental health issues in the workplace, there is another area of life weighing heavily on their teams.

According to The Canadian Payroll Association Survey of Working Canadians, employees across the country are struggling to cope with financial stress - and this area is a missed opportunity of employee support for employers.

“Our research found that finances are the top source of stress for Canadians in every province – more than worries about health, career, politics and family combined,” says Wendy Doane, CPM, Board Chair, of the CPA.

“One out of four of the more than 4,000 survey respondents admits to spending 30 minutes a day distracted by financial stress, and forty-three per cent of workers admit that their work is suffering because of it.”

Conservatively, financial stress costs the Canadian economy almost $16 billion in lost productivity - and that figure doesn’t include the added cost of absenteeism, employee turnover or increased benefit claims.

Almost half – 43% - of Canadians surveyed are living paycheque-to-paycheque, a number Doane calls troubling. One out of three respondents admits they are spending more than their net pay - their debt has increased since last year, despite 40% reporting they feel overwhelmed by the overall amount they owe, including mortgages.

Of those with credit card debt, 38% said it will take them at least a year to pay it off - and five per cent of reported it will take them over a decade, racking up interest the whole time. 

As a general rule, financial advisors recommend saving 10% of net income, but the survey shows two-thirds of employees fail to reach that goal.

Although this is a stress that develops first at home, for example as a consequence of the rising cost of living, the detrimental effect does not stop at those four walls.

“The debt and stress is perpetual and has to have an impact on every aspect of their life,” Doane says. “As friends and neighbours, we should all be concerned about these individuals who aren’t likely able to save for a rainy day - to say nothing of retirement.”

Doane acknowledges that it’s a competitive business environment out there, but suggests that by supporting the financial wellness of employees, employers could “provide a competitive edge with tangible bottom-line implications.”

So what can employers do to access this competitive edge? Turn to payroll for help, Doane says.

“Payroll is on the front-line of financial wellness in the workplace,” she notes, adding that when it comes to financial wellness, knowledge is power - and employees are looking to their employers to provide some of that knowledge.

“Seventy-nine per cent of workers said that they would value financial literacy learning or education in the workplace, on topics like how to make a budget,” Doane says.

She encourages employers to develop and manage a “Pay Yourself First” program, which empowers payroll to work with employees to arrange for a portion of their pay to be automatically directed into a savings account.

“These programs work,” Doane says, adding that resources for setting up a program like this can be found on the CPA’s website.

While it’s a good thing that 55% of employers offer such a program, she points out there is definitely still room to improve. Implementing these programs result in better money management, a higher rate of savings and a steady accumulation of retirement funds. Among those surveyed, when employers had a “Pay Yourself First” program in place, the percentage of workers who reported feeling overwhelmed by debt tended to be lower.

“There is no question that how employees are compensated has a direct impact on financial wellness,” Doane says. “But it’s not always about how much they are paid. There are opportunities for an organization to work with payroll experts to design creative compensation models to better address the needs of their workers.”