How to Help Your Employees Recession-Proof Their Finances
As the new decade unfolds, economists are going back and forth about whether there is an impending recession. The World Bank reports that there will be gradual growth over the next year despite trade tensions. However, employees are feeling some negative effects.
Even with the unemployment rate at a 50-year low, many traditionally strong companies like Lowe’s and HP are experiencing layoffs largely as a result of automation and outsourcing. Whether it’s a recession, downsizing, budget cuts, or an increase in the cost of benefits, employees are vulnerable to intense feelings of stress and anxiety as they worry about the stability of their financial future.
The Impact of Financial Stress on Employees
For those employees fortunate enough to weather the storms, watching the news and witnessing other organizations go through layoffs can lead to fear about the possible doom of a recession. This terrifying chronic feeling is commonly referred to as financial stress. Most individuals are completely dependent on their place of employment to provide the means for them to have a roof over their head, food on the table, health insurance, etc.
Financial stress has a widespread impact including employees’ emotional well-being and productivity at work. Financially stressed employees spend 2-5 hours during their work-week dealing with personal finances. Additionally, the amount of sick time that employees take as a result of the physical effect that financial stress can have on their health increases substantially. Stress and anxiety can increase the risk of a heart attack and/or weaken the immune system, resulting in employees having to take more sick leave due to tangible physical ailments.
In addition to a decrease in productivity, research indicates that employees’ financial behaviors shift drastically when they believe that a recession may be on the horizon. One example is employees slashing their retirement contributions. The share of millennial workers saving 2% or more of their income in retirement accounts plunged by 39% from the last half of 2018 to the first half of this year. That figure dropped by 32% among Gen X employees and 22% among baby boomer workers. When employees stop investing in their future, they place themselves in a vulnerable position that could have an impact on their financial health and ability to save.
Responsibility as an Employer
As an employer, it is imperative to create an honest, transparent environment so employees know where they stand within the company. Implementing a financial wellness program, especially before employees feel financially stressed, will go far in creating a healthy company culture. As our country experienced previously, markets can collapse unexpectedly. Therefore, HR departments should be proactive in providing financial wellness benefits to support employees. If your employees start asking and you don’t have a solid strategy, it’s too late.
Preparation is the best protection against a recession. Even if your organization is fortunate to have weathered an economic downturn, that doesn’t mean the effects won’t be felt by your employees. It’s crucial to envision yourself in your employees’ shoes – what are they thinking? What is their level of confidence in your organization? Now is the time to educate your employees, give them the tools to organize and manage their finances and improve their financial situation. Provide them with resources and knowledge to track their spending, create budgets, establish savings accounts and see where their paycheck is going will set them up for life-long success. If they start preparing and saving now, they’ll be better equipped to handle financial challenges if a downturn happens. Providing a holistic financial wellness program is the best way to help your employees recession-proof their finances.