by Adam Coleman, CEO of Lahinch-based HR software solutions provider HRLocker
The cost of living crisis is hitting each and every individual differently. Inflation is at the highest rate it’s been in the last 40 years, affecting the bare necessities of life. Fuel costs are unpredictable, weekly food shop bills are skyrocketing, and even water costs are increasing for many.
The latest B&A Consumer Confidence survey reveals that more than one million people in Ireland are struggling to make ends meet. If that hasn’t dampened your spirits enough, businesses are feeling the crunch too.
Office rental costs are rising, as is the amount to run them. With more workers demanding a hybrid work format, these buildings are often empty, underutilised and more expensive to heat. The financial burden for businesses isn’t just reflected by their bank balance but also in the mental health of their employees.
Finance is one of the top causes of stress outside of the workplace. In fact, 80% of workers say money worries negatively affect their performance. With this in mind, let’s look at what financial stress is, how it can impact employees, and the best ways to try and alleviate it.
What is financial stress?
Anyone can experience financial stress, regardless of income or tax bracket. However, financial stress tends to impact those on lower incomes more often. Making mortgage or rent payments, chasing credit card debt, and meeting family demands, such as childcare costs, can build up until a high level of tension is caused around a person’s finances.
Financial stress becomes an issue when it starts to impact an individual’s life on a day-to-day basis. For example, they might become more forgetful or irritable, acting out of character. They might also start acting more irresponsibly with money, perhaps gambling or taking out payday loans.
How financial stress impacts employees
Any kind of stress outside of work can affect employees. But financial stress is directly linked to their job performance – and once this starts to be impacted, it can spiral relatively quickly.
Financial stress can also impact the health of your employees too. Sleepless nights and a poor diet can lead to reduced concentration, a decline in physical health, and even alcohol or drug problems.
Of course, it’s a catch-22 situation for an employee under financial stress. Their work performance is affected, which may lead to a review and even the possibility of redundancy. Their financial situation becomes even more dire when their regular income is suddenly cut off.
Before this situation arises, there are many ways to alleviate the financial stress an employee is experiencing.
Helpful ways to reduce financial stress on your employees
Unfortunately, with the cost of living crisis impacting businesses as negatively as individuals, pay rises and salary reviews aren’t always an option. However, other steps can be explored to help your employees face the cost of living crisis head-on. The most important thing an employer can do in these extenuating circumstances is offer support and options wherever possible.
- Offer flexible working
Commuting is a huge contributor to an employee’s financial stress. The cost of fuel, coupled with car costs, can really impact someone’s salary. With flexible working, employees can choose as and when they come into the office. This not only helps with fuel costs but childcare fees too.
Flexible working doesn’t just mean hybrid. Offering a shorter working week can give many employees an additional day to look after their children or even start a side hustle (more on this later). For you, it means saving on office costs, such as heating.
- Provide a cost of living bonus
If you can’t provide a salary increase, provide a cost of living bonus. This small gesture can go a long way for many members of your team – and they won’t be quick to forget it, either. You could provide a fuel contribution if you’re keen to keep people coming into the office, but in tough times, allowing your employees to choose what they need that money for is better. Someone suffering from financial stress might desperately need to pay their electric bill; a fuel card won’t help them out.
- Review reward and bonus strategies
Do you already have a reward or bonus scheme in place? Make sure to review it. You might find that you’re missing employees on lower incomes off this scheme, which can be a bit of a kick in the teeth. Keep your strategies up to date and share them with your team in a central location. Transparency during difficult periods is essential (think about what we learned during lockdown).
- Update your communication strategy
Communicating effectively during periods of turmoil is crucial. Employees suffering from financial stress need to feel like they have support from you; having an easy-to-access document centre is just one stop you can take to providing that support.
Some employees suffering from financial stress might find certain communication methods invasive and easy to ignore. Ensure you have a system in place to communicate with employees directly and on a regular basis rather than just over email.
Simply communicating with employees that you’re aware of the cost of living situation is often the first step in reassuring staff that you’re not blind to what is happening and acknowledging that some employees may be struggling.
Ensure you speak to employees as individuals rather than a group, as some may feel more comfortable speaking privately than admitting financial stress in front of others.
- Encourage side hustles
Financial stress can often lead employees to take on second jobs or start a side hustle. You could actively encourage this as long as it doesn’t negatively impact their full-time role. Not only does it breed trust between employee and employer, but it can also increase productivity.
A recent study by HR Locker indicated that 1 in 4 employees now have a side hustle. With inflation set to carry on rising, employers can expect to see more team members generating additional income.
- Pay staff fairly
A tumultuous event, such as a recession, is actually an excellent time to review company salaries. Are you paying staff fairly, in line with inflation? What does the market look like against your numbers? Reviewing at this stage and potentially increasing salaries can provide employees with the support and reassurance they need.
- Provide financial well-being tools
You might already have a well-being process in place, but have you ever thought about financial well-being? Resources such as financial advisories, an employee assistance programme, and online information can help team members manage their finances successfully.
The cost of living crisis is causing increased financial stress for many employees. And with a recession in the pipeline, it’s likely that more of your team members will be affected in the future. What we’ve learnt, however, is that communication is key. A clear understanding of your employees’ worries and acknowledgement from your company is an effective way to start.
How you choose to help your employees navigate the cost of living crisis is entirely up to you, but with so many options available, simply doing nothing is unacceptable.