When employees’ poor financial resilience becomes a people risk at work

With fewer safety nets available to individuals, financial shock is becoming an increasing risk for more and more people.

A lack of financial resilience among UK workers has become a major risk for employers.

A potent mix of energy price hikes and rises in mortgages, rent and other household costs is leaving many with limited savings. With no safety net, people are being left vulnerable to financial shock with direct implications on businesses: lost productivity, poor retention, absenteeism through stress and poor health, and a risk to overall organisational resilience.

A lack of savings and financial resilience can affect everyone, irrespective of their role or rank. At every socio-economic level, there is a risk of employees finding themselves in the red. While salaries might vary significantly, financial fragility affects both ends for a variety of reasons.

1. Productivity down, 'presenteeism' up

Employees worried about bills or emergencies will often struggle to concentrate and spend a disproportionate amount of their working day focused on financial issues. It can also lead to presenteeism – being physically present but mentally disengaged - which can be just as costly as absenteeism, and potentially more dangerous.

For an IT specialist needing sustained concentration to code, manage system design or monitor cyber risk monitoring, financial distraction could slow problem-solving, create errors dealing with complex tech environments and impact innovative thinking. In this kind of role, even small dips in performance can create large ripple effects.

For a manufacturing or deskless worker, worrying about finances can be more physically endangering. Distraction and stress can often mean less attention paid to repetitive tasks or other safety-critical roles using machinery. This can be further compounded by the need to pick up additional shifts elsewhere, increasing fatigue and impacting a business's output and targets.

2. Sickness, absence and mental health

Financial insecurity is strongly linked to anxiety, sleeping issues and stress, which in turn lead to more sick days and burnout, and ramps up healthcare and insurance premiums.

Financial stresses caused by the affordability of a mortgage, everyday living costs or childcare can easily lead to stress-related absence.

In lower-paid roles, financial fragility can quickly snowball if overtime or second jobs cause heightened fatigue. This dynamic can leave businesses open to more short-term sickness absence, which can disrupt shifts and grind productivity to a halt.

3. Turnover and retention

Logically, employees without savings are more likely to leave for a small pay increase, take on a second job, or leave unexpectedly if things escalate. All of which increases churn.

In competitive labour markets like IT, employees without the luxury of a financial buffer are more likely to listen to persuasive recruiters and move for a modest rise, prioritising a short-term fix over long-term career development. By the same token, a lower-paid worker will move for a small hourly pay increase or take a role that offers immediate pay, weekly pay or more overtime.

4. Vulnerability to the unexpected

Workers living from payslip to payslip are less able to absorb delays, mistakes, surprises or a cut in hours, especially those on lower pay. Something like an IT-induced pay error or unexpected car repair could, therefore, mean immediate hardship, absence and a fall-down in morale.

Employees with higher fixed financial commitments like expensive mortgages, childcare or student loan repayments can often find themselves quickly in debt, if caught unawares.

5. Pressure on HR and management

When dealing with financial stress, vulnerable employees are more likely to ask for pay advances or flexible pay arrangements, or seek direct HR support through an employee assistance programme (EAP).

All of this can naturally increase workload for our HR professionals and line managers, who will often field more requests for salary increases - especially from specialists - or have to deal with the aftermath of an unexpected departure.

At the lower-paid level, managers are more likely to be dealing with requests for pay advances or overtime and intervening with rotas due to higher levels of absence. Ultimately, if a manager's answer cannot match up to an employee's hope or wish, the resulting conflict almost always affects engagement and morale. As a COO, this kind of squeeze on time would be a major concern for me.

6. Lower engagement, morale and loyalty

From a cultural point of view, employees who feel financially insecure are more likely to feel undervalued, lose trust in leaders and forget about an organisation's goals. The stress often means they simply don't have time to invest in anything other than themselves and their family.

All of this can eat away at a company's output by reducing cohesion and that 'extra mile' discretionary effort, and making innovative thinking far less likely, which can be especially damaging within senior IT roles. In a deskless environment which relies on team spirit, or workers being open to rota changes and flexibility, withdrawn and absent workers obviously pose an operational threat.