Research Shows Financial Worries Really Do Make Workers Less Productive – Here’s What You Can Do About It

With sky-high petrol prices, increasing cost of living and constant loadshedding, it is no wonder that South Africans are stressed about their finances. DebtBusters’ 2023 Money-Stress Tracker found 78% of respondents experienced financial stress. There was also a steady increase in consumers who could not make their money last the month (indicated by a spike in consumers taking out payday loans). And for almost 80% of these people, this stress spills over into the workplace.

Why HR needs to care about financially stressed workers

Stressed employees are bad for business. Recent research from financial services giant PwC shows that stressed employees may be distracted by lack of sleep, poor mental health and deteriorating personal relationships – where 1 in 3 employees admit these issues affect their productivity. This leads to phenomena such as presenteeism, where employees are present at work but so distracted by worry they are mentally checked out. In fact, PwC found that almost 60% of stressed employees spend 3 hours or more per week at work worrying about money issues. That translates to 12 hours being lost every month, for almost 20% of your workforce.

Being paid early is a solution to improve productivity

Research has shown that financial stress is reduced only when workers actually receive money, even when they are expecting a future payment. In other words, financial stress does not dissipate until workers have cash in hand, even when they know payday is coming. So while corporate wellness days and financial education may be a long-term solution to financial issues, in the short term nothing is more effective in treating financial stress than being paid. But is this a viable solution?

This question was addressed by researchers from MIT and Columbia University, who analysed low-skilled, financially stressed workers in India over a two week contract period. They examined two groups of low-skilled workers – one paid at the end of a two-week contract, and another group paid twice (the latter group was paid their accrued wages before the end of the contract period, then the remaining balance on the final day). Workers paid earlier increased their output by 7.1%. Also noteworthy is these workers made fewer mistakes, indicating they were more attentive at work than the employees who were paid later.

In other words, this study shows that productivity is reduced when workers are under financial pressure. But when workers are given a portion of their earnings before payday, they become more productive (that is, increase their output) and are more attentive (make fewer mistakes) than workers who are paid normally.

What are more long-term solutions?

Once EWA has been implemented and short-term financial difficulties are addressed, long-term solutions can be implemented to further improve productivity.

1. Offer Financial Education And Counseling: Upskilling employees is arguably the most sustainable way to assist with financial difficulties. Companies can provide workshops, seminars, and one-on-one sessions to help employees better manage their finances, create budgets, and plan for the future. This can be done in-house or through partnerships with financial wellness providers.
2. Foster Open Communication: Many companies unwittingly employ loan sharks, who make extra money offering exploitative loans to their own colleagues. Encourage employees to speak openly about such experiences with their managers or HR representatives. Moreover, when employees have a safe and supportive environment, they are more likely to seek help when needed rather than abscond.
3. Review And Enhance Employee Benefits: Many companies unwittingly employ loan sharks, who make extra money offering exploitative loans to their own colleagues. Encourage employees to speak openly about such experiences with their managers or HR representatives. Moreover, when employees have a safe and supportive environment, they are more likely to seek help when needed rather than abscond.