How financial stress affects employee productivity


Smartwage shares tips on how earned wage access can improve financial well-being.

After more than a year of disruptions caused by the Covid-19 pandemic, finances are proving to be the main cause of employee stress, ranking higher than job, health and relationship stress combined.

In South Africa, according to a 2019 survey by DebtSafe, debt-related stress is one of the key factors attributed to negative mental health in the workplace. Debt collectors, landlords and emergency expenses have little respect for work-related pressures, and the loss in employee productivity that happens as a result, is estimated to cost employers a substantial amount each year.

Low productivity equals low profits
In the United Kingdom, employers are estimated to lose up to £120 million (~R2,520 million) each year due to poor financial wellness and in the US, nearly 50 percent of employees admit to suffering from financial stress. This makes employees 5.8 times more likely not to finish daily tasks and 4.9 times more likely to have lower work quality.

In South Africa, the problem is particularly devastating. Seventy-six percent of South Africans admit to running out of money before the end of the month, leaving them feeling frustrated and hopeless. A PwC Employee Financial Wellness Survey also revealed that as many as 89 percent of South African employees are concerned that they won’t be able to pay their bills and loans each month.

In a country plagued by fluctuating petrol, electricity and food prices, it is no wonder that financial constraints harm employee productivity. Did you know that as much as 70 percent of unscheduled absenteeism is caused by stress-related illness? Financial stress is often the culprit. As a result, your company’s bottom line is being compromised.

Employee welfare
A financially-stressed employee will spend, on average, 20 hours a month dealing with financial issues at work. This means that on average, employees spend roughly 27 working days in a year dealing with financial issues when they could be spending this time focusing on their work.

The loss in productivity that happens as a result not only makes it difficult for HR managers to sustain a productive, healthy and engaged workforce, but has significant financial implications on the organisation.

This reality is the reason why businesses are starting to recognise the benefits of investing in their employees’ financial well-being. By helping their staff conquer financial uncertainty in a post-Covid-19 world, these companies are proving that they have the welfare of their employees at heart and in turn, they are reaping the rewards.

How can earned wage access improve financial well-being?
Technology continues to shape the way we live, travel and entertain ourselves – but the way we get paid has stubbornly remained the same for hundreds of years. How can you foster a culture of financial wellness in your company?

The answer is simple; it’s by giving your employees the necessary tools to better manage their money. Earned Wage Access (EWA) is an employee benefit at the heart of employee financial health. EWA means that employers can offer employees access to their already-earned wages, throughout the month. In doing so, employers not only enjoy a more engaged and productive workforce but also an increased bottom line.

Below are three reasons to switch to earned wage access:

1. Reduced employee turnover
According to the 2017 Work Institute’s Retention Report, it can cost employers as much as 33 percent of a worker’s annual salary to hire a replacement when that worker leaves. When coupled with the extra time spent on hiring for the HR department, it is obvious that employee turnover comes at a major cost.

By giving employees control over their wages, employers can equip their employees with the tools to become financially resilient. With Earned Wage Access, employees can also relish in the fact that they no longer have to rely on loan sharks and mashonisas to help them pay for unexpected expenses in the month.

This added benefit gives employees financial stability and urges them to think twice when seeking employment elsewhere.

2. No more requests for payday advances
When an unexpected financial emergency arises, some workers have nowhere to seek financial help but from their employer. For employers, payday loans can become very expensive when you employ a large staff cohort.

Although employers may want to help their employees in times of financial distress, payday advances can be tedious and time-consuming, placing additional stresses on HR staff. Companies that implement these loans in-house also need to factor in the impact on the employer’s cash flow.

Businesses that opt for Earned Wage Access are in a much better position when it comes to payday loan requests. That is because these advances come from a third-party provider, such as SmartWage, and employers and HR staff are cut out of the equation. This saves the HR department time and saves the business from having to dip into its monthly cash flow.

3. Employees are able to get to work
Did you know that insufficient funds for transportation has been identified as a leading cause of employee absenteeism in South Africa? Earned Wage Access solves this problem. By allowing employees to use a portion of their already-earned wages to pay for transport, staff absenteeism drastically declines. It’s becoming increasingly apparent that Earned Wage Access can bridge the gap between employees that are willing to work, and employees that are actually able to get to work.

SmartWage solves the problem
SmartWage is the most affordable and accessible Earned Wage Access software in South Africa. It integrates seamlessly with your existing HR and payroll software and the setup process requires little to no input from your team.

By directly requesting their wages through SmartWage’s communication channels, employees can have on-demand access to what they earn on a daily basis. We also take care of all reconciliations and payroll adjustments, meaning no hassle for your HR and payroll staff.

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