Debt Stress is a Drain on Job Performance. Here’s What Employers Can Do About It

Debt Stress is a Drain on Job Performance
Sean FoxMarch 9, 2022
Key Takeaways:
  • Workers who struggle with managing debt face challenges that often spill over into the workplace
  • Financial wellness benefits designed to address these challenges are popular among employees, but largely unavailable
  • Employers can address this growing problem by embracing financial wellness benefits that improve employees’ productivity, retention, recruitment, and overall health and happiness

Freedom Financial Network has been helping financially struggling and striving consumers for 20 years, so we know all too well how the stress of debt and financial hardship can affect every facet of peoples’ lives. And for many, these challenges have been magnified by a global pandemic that’s now entering its third year.

The workplace is not immune to these pressures. The Great Resignation demonstrates how years of stagnant wage growth have strained household balance sheets. So it’s not surprising that 63% of full-time workers at medium and large companies reported having at least one form of unsecured debt, such as credit cards, medical bills and personal loans, according to a new study by the nonprofit Financial Health Network and sponsored by Freedom Financial Network.

Despite working full-time, employees with unsecured debt face a wide range of personal and financial challenges that frequently affect their job performance. For example, 65% reported that debt stress impacts their physical health and almost half (47%) of respondents said they were unable to pay all their bills on time at least once in the past 12 months.

In addition, a third (32%) said that they or someone in their household had trouble paying medical bills in the last year. Among those respondents, half of respondents said they had to reduce spending on basic needs such as food and clothing to pay medical bills.

Other Key Findings:

  • Nearly half (47%) of respondents with $25,000 or more in unsecured debt said they worry about whether they can afford groceries.

  • 34% of employees with over $25,000 in debt and 24% of those with less than $10,000 in debt reported someone in their household stopped taking a medication or took less than prescribed because they couldn’t afford it.

  • 32% of all respondents said they had trouble paying their rent or mortgage.

The Impact of Debt on Physical Health and Job Performance

Financial Health Network surveyed U.S. consumers who work full time at medium and large companies with 500 or more employees, a cohort that accounted for nearly 48% of all private-sector workers at the end of 2021, according to the Bureau of Labor Statistics. The study, Helping Employees Manage Debt: Designing Debt-Related Benefits to Match Employee Needs and Preferences, found that 63% of these workers have unsecured debt in the form of credit card, medical or personal loan balances. It is this subset of workers that the study focuses on.

The survey found nearly 40% of respondents missed at least one day of work in the last 12 months due to debt-related issues. Furthermore, 50% of respondents spent an average of one hour per week at work dealing with debt-related issues — the equivalent of one whole week of lost productivity over the course of a year.

Understanding how those struggles translate to the workplace may be startling and concerning to employers. At the same time, the recent spike in inflation means simply throwing money at this problem isn’t enough. Companies need to be creative in developing a comprehensive approach to attracting and retaining top talent, while also helping their employees strengthen their financial footing.

One frequently underutilized strategy is providing debt-related financial wellness resources through employee benefits programs. Financial Health Network asked respondents about their access to 13 types of debt-related financial wellness benefits, including general purpose financial education and tools; personalized advice; employer-funded financial assistance; and payroll advances, loans, debt consolidation or other debt relief products. Overall, the study found access to these benefits is extremely limited. To make matters worse, employees who would get the most out of financial wellness benefits, such as those with higher total debt and debt-related stress, as well as those with lower incomes, have the least amount of access to these programs.

Workers Have Limited Access to Financial Wellness Benefits

Debt-Related BenefitRespondents with Access
Free access to financial planning app/website (e.g., budgeting and savings tools and calculators)38%
Free financial education resources37%
Free personalized coaching sessions with a financial professional30%
Free credit counseling sessions to help manage debt29%
Employer contributions to an emergency savings account28%
Access to an emergency savings account28%
Emergency grant fund to help with an unforeseen catastrophic event or illness27%
Access to low-cost personal loans that can be paid back via payroll26%
Employer contributions toward student loan repayment26%
Free or low-cost access to accrued, earned wages in advance of payday24%
Access to mortgage loan support23%
Access to student loan solutions that offer evaluation tools and options for refinancing22%
Access to a debt consolidation loan or other form of debt relief20%

Source: Helping Employees Manage Debt Designing Debt-Related Benefits To Match Employee Needs and Preferences, Financial Health Network, 2022

While still uncommon, these debt-related programs and tools can significantly improve worker productivity and retention. For example, a majority of respondents believe debt-related financial wellness benefits belong in the workplace. The study also found 62% of respondents reported they would be more likely to stay at a job that offered useful debt-related benefits. And at least 40% of respondents who do not have debt-related benefits said that, if their employer offered them, they would be somewhat or very likely to use them.

The data also suggests that employers designing debt-related financial wellness benefits should emphasize confidentiality practices, ease of access, clear explanation of the benefits, and availability of personalized help when considering whether to participate in debt-related benefits. By tailoring debt-related benefits to employee needs and preferences, businesses can leverage this underutilized tool in their benefits toolkits and drive measurable impact for the workers who need it most.

Download the full report, Helping Employees Manage Debt: Designing Debt-Related Benefits to Match Employee Needs and Preferences

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