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Financial worry when should HR step in

Employers are increasingly emphasizing employee wellness and the prevention and management of mental health issues in the workplace. However, their teams are also experiencing significant challenges in another aspect of their lives.

The Canadian Payroll Association Survey of Working Canadians indicates that employees throughout the nation are finding it difficult to manage financial duress. This represents a missed opportunity for employers to provide employee support.

Wendy Doane, CPM, Board Chair of the CPA, stated, “Our research revealed that finances are the primary source of stress for Canadians in all provinces, surpassing concerns regarding health, career, politics, and family.”

“Financial stress is the source of distraction for 30 minutes each day for one out of every four of the more than 4,000 survey respondents, and forty-three percent of employees acknowledge that their work is being negatively impacted as a result.”

Financial duress results in nearly $16 billion in lost productivity for the Canadian economy, a conservative estimate. This figure does not account for the additional expenses associated with absenteeism, employee turnover, or increased benefit claims.

Doane finds the fact that nearly half of the Canadians surveyed are living paycheque-to-paycheque to be concerning, specifically 43%. Despite 40% of respondents reporting that they feel overwhelmed by the total amount they owe, including mortgages, one out of every three respondents confesses that they are spending more than their net pay. Additionally, their debt has increased since last year.

38% of individuals with credit card debt reported that it will require at least one year to pay it off, while 5% reported that it will take over a decade, during which time they will accumulate interest.

Financial advisors typically advise employees to save 10% of their net income; however, the survey indicates that two-thirds of employees are unable to accomplish this objective.

Despite the fact that this tension initially manifests at home, for instance as a result of the increasing cost of living, its adverse consequences extend beyond those four walls.

“The debt and stress are enduring and must affect every aspect of their life,” Doane asserts. “As friends and neighbors, we should all be concerned about these individuals, who are unlikely to be able to save for a rainy day, let alone retirement.”

Doane acknowledges that the business environment is competitive; however, he proposes that employers could “provide a competitive edge with tangible bottom-line implications” by supporting the financial wellness of employees.

Therefore, how can employers capitalize on this competitive advantage? Doane recommends that individuals seek assistance from payroll.

She observes that payroll is at the forefront of financial wellness in the workplace, and she emphasizes that knowledge is a powerful tool in the realm of financial wellness. Employees are anticipating that their employers will provide them with some of this knowledge.

Doane reports that seventy-nine percent of employees expressed their willingness to consider financial literacy education or training in the workplace, including topics such as budgeting.

She advocates for employers to establish and oversee a “Pay Yourself First” initiative, which enables personnel to collaborate with employees to ensure that a portion of their pay is automatically transferred to a savings account.

“These programs are effective,” Doane asserts, noting that the CPA’s website contains resources for establishing programs of this nature.

Although it is commendable that 55% of employers provide this type of program, she emphasizes that there is still space for improvement. The implementation of these programs leads to improved money management, a higher savings rate, and a consistent accumulation of retirement funds. The percentage of employees who reported feeling burdened by debt was lower among those surveyed when employers implemented a “Pay Yourself First” program.

“There is no doubt that the compensation of employees has a direct impact on their financial well-being,” asserts Doane. “However, it is not always contingent upon their compensation.” There are opportunities for an organization to collaborate with payroll experts to develop innovative compensation models that more effectively meet the requirements of its employees.