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Personal Financial Worries Plague Workers Worldwide
 

By Roy Maurer  8/12/2014

Stress is not just a first-world problem—it’s a global issue. In fact, the leading health issue driving wellness strategies globally is stress, according to a new survey of over 1,000 respondents across 37 countries conducted by global HR benefits consulting firm Buck Consultants.

And according to the Phillips Index for Health & Well-Being, a survey report focused on countries in the Americas, Europe and Asia, stressors are focused on immediate concerns such as having enough money to pay bills and the threat of job loss, as well as on macro issues such as the state of the economy and health care costs.

Recent trends—such as income stagnation; rising costs for housing, education and health care; exploding personal debt; and eroding pension systems across the world transferring financial responsibility to individuals—have generated enormous financial stress, according to experts.

And why is understanding financial stress important? Because the leading drivers of health care costs for employers—depression, obesity, anxiety, even back and neck pain—are caused or exacerbated by financial stress, said Dan DeKeizer, senior vice president, global employee benefits, at MetLife. “A vicious circle is formed: Financial stress translates into mental stress, which translates into poor health outcomes, workers getting sick and lost productivity, which further impacts their ability to achieve good financial health,” he said. “As employers, we really need to broaden our scope and start looking at these issues.”

According to the Buck Consultants survey, the leading reasons for implementing wellness programs globally are reducing sick leave and presenteeism, with improving workforce morale and engagement also increasingly important, especially in Europe. Managing health care costs remains the top objective in the United States.

“We should be concerned because financial distress impacts productivity,” DeKeizer said. “People are less effective at work when they’re stressed about their finances. They don’t make good decisions for themselves or their employers. Ultimately, your employees’ financial distress is costing your company money.”

According to 2012 research from the Society for Human Resource Management, 83 percent of HR professionals indicated that personal financial challenges had a “large or some impact” on overall employee performance. Almost half indicated that an employee’s ability to focus on work (47 percent) and overall employee stress (46 percent) were the aspects of employee performance that were most negatively affected by personal financial challenges.

Bettering Financial Literacy

At the same time that more financial responsibility is being placed on individuals, there is growing evidence that the majority of people lack the financial skills necessary to tackle these challenges.

“While a majority of people agree that the government will not be able to provide sufficient retirement funds, this realization is not translated into action,” DeKeizer said. According to the MetLife Study of Financial Wellness Across the Globe, only 38 percent are saving for retirement, 50 percent have “some kind” of financial plan in place, and nearly 20 percent do not know where their income will come from in old age.

According to the MetLife study, less than half of respondents felt they had the information they needed to make sound financial decisions. For example, 44 percent of workers in Japan, 40 percent in India and 34 percent in the U.S. scored “good” or “excellent” in financial literacy.

DeKeizer advised companies to find out where their workforce currently gets financial information before initiating a financial wellness program. People may be more or less receptive to financial education, depending on national values and cultural norms. In China and India, for example, about 75 percent of workers use informal sources such as family and friends for advice, according to MetLife. In the Netherlands, only 17 percent use informal sources, whereas 43 percent of Dutch employees use financial advisors, brokers, accountants, banks or insurance company representatives for financial advice. In the U.S. 27 percent use formal sources.

What Employers Can Do

Companies can improve the financial wellness of their employees through their compensation and benefits, and by providing financial education and other services, DeKeizer said.

He pointed out that working on a global program will require tailoring your offerings to fit local needs, due to differences in national legislation; governmental social welfare provisions; and cultural attitudes about the handling of finances, retirement, health and risk.

DeKeizer broke a typical workforce down into four groups:

Motivated and in possession of disposable income to address financial challenges. This is the easiest group to deal with, he said. “You have an opportunity to secure this group’s loyalty by offering voluntary benefits. This group is already planning for retirement and saving for health care. Let them do that through the employment relationship, and improve engagement and productivity as a consequence,” DeKeizer suggested.

Voluntary benefits need to be tailored to the country you’re doing business in. For example, according to a recent MetLife study of three large Latin American economies, Brazilian workers are particularly interested in adding to their retirement savings with a supplemental pension plan, while life, accidental death and disability insurance are of greater interest to Chileans and Mexicans.

Motivated and not in possession of income to address financial challenges. These are your low-wage earners, DeKeizer said. Options include providing financial education, career assistance and higher pay. “If they’re motivated, why not pay them more?” he said. “Why not connect them to your company so they’re dedicated for the long term?”

German multinational company Siemens provides a learning campus for employees to broaden their knowledge, improve their skills and receive career assistance, DeKeizer said. “These programs put you in a peer setting, so you don’t feel like you’re the only one dealing with these issues,” he noted.

Unmotivated and in possession of disposable income to address financial challenges. These are people like me, DeKeizer joked: folks that “know what they should do but don’t do it.” For this group, DeKeizer suggested designing programs that use inertia positively—for example, by automatically enrolling workers into mandatory or opt-out benefits programs. This is especially useful with retirement and health care benefits, he added. “McDonald’s in the U.K. tried this in 2013, and after four months only 3 percent of the auto-enrolled salaried employees had opted out and only 2.4 percent of auto-enrolled hourly employees had done so,” he remarked, noting that more salaried employees actually increased their contribution in the first week than opted out. “You make it more trouble to stop putting money into the retirement plan than to just keep doing it,” he said.

Unmotivated and not in possession of income to address financial challenges. This is the hardest group to deal with but fortunately the smallest one, DeKeizer said. “I would suggest an employee assistance program for people that need help but don’t know where to start,” he advised. “There are oftentimes other, more serious issues involved with this group.”

DeKeizer offered additional points to consider when rolling out a financial wellness plan:

  • Set a target and measure the results. After launching a program, conduct telephone interviews and e-mail surveys to evaluate its effect.
  • Make your message relevant for your target audience, increasing the probability of success in marketing a program.
  • Be creative to gain participation. “You can use peer support and gamification to make the process of saving more fun,” he said.
  • Enhance employees’ perception of control. “Giving people choices which effectively lead to the same outcome provides a measure of control for the employee, lessening stress,” he said.
  • Promote programs through multiple touch points to build organizational commitment. Communications should be conducted in a variety of ways, including face-to-face interactions and e-mail notifications. Also, be sure to reach employees’ families through messaging to the home. “Simple, targeted messaging works best, and cascading leadership messages provide positive reinforcement,” he said.

Roy Maurer is an online editor/manager for SHRM.

Follow him at @SHRMRoy

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