What impact is debt having on employee productivity in UK SMEs?


In 2017 the UK boasted 5.7 million private sector businesses, 99.9% of which were small or medium-sized enterprises (SMEs). SMEs account for 60% of all private sector employment in the UK.

What impact is debt having on employee productivity on UK SMEs?

While UK SMEs have typically enjoyed significant annual growth in employee productivity, since the financial crisis in 2008 it has dropped from 2% to less than 1%. Despite rising to 0.7% at the end of 2017, many are concerned about the lack of growth in employee productivity in UK SMEs over the long term.

In The DNA of Financial Wellbeing 2017 report Neyber found that a third of 10,000 surveyed employees felt as though financial worries were the biggest concerns in their lives, with 24% saying it had affected their ability to sleep.

As well as the global economic downturn, Britain's imminent departure from the European Union has added new uncertainty. 35% of employees said Brexit affected how they think about their finances in general, with 44% saying it had changed how they thought about property specifically.

If SMEs can't generate sufficient income it gets harder for them to improve real levels of pay for employees. When pay doesn't keep pace with inflation employees are being paid less in real terms. Not only does this reduce the ability for them to improve their financial situation, but it can lead to a number of different problems that all contribute to poorer employee productivity.

How can debt affect the day to day performance of your workforce?

82% of employers in the Neyber study thought that employees' personal financial health is important to their organisation as a whole. They acknowledged a number of ways in which financial pressures can have a negative effect on employees in the workplace, including overall behaviour (54%), work performance (56%), relationships (54%) and relationships with management (51%).

Employees suffering with financial problems may suffer from stress or lack of sleep leading to fatigue and lack of focus. They might be distracted fielding calls from creditors and debt collectors. This anxiety can manifest itself in increased levels of absenteeism and workplace error or accident incidences.

Those trying to improve their financial situation may look for additional work outside their main job, whether it's casual part time work or freelance jobs. This means employees are putting more time and effort into external activities and less into their main job.

Moreover those with financial worries are more likely to be withdrawn, hesitant and negative in their interactions with colleagues. This can have a negative effect on their colleagues and diminish the ability of team members to work together effectively.

What can be done about debt and employee productivity?

How can HR teams concerned primarily with training, development, attracting and retaining talent help to mitigate the risk of dwindling productivity as a result of employee financial worries?

Employers can educate employees about finance, whether it's through the provision of workshops, presentations, multimedia or reading materials. Not only can this help employees get out of bad financial circumstances, but also help them prepare for unforeseen future events.

Most importantly employers should be approachable on employee financial problems. After all, employee financial wellbeing should be an employer's priority too.

This article was provided by Neyber.


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