How is employee debt affecting companies’ performances? - Emerge UK
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How is employee debt affecting companies’ performances?

We read an interesting article recently, concerning that very question. Surely, it’s only a company’s finances that bears down on a company’s performance? For example: if a company is cash-strapped and laying workers off, it’s fair to say performance, morale, and its immediate future are under threat. But if that same company has a burgeoning bank account, is expanding at an impressive rate, and is hiring new people left, right and centre, it’s just as fair to assume that its output and performance is likely to be very rosy indeed.

So what if Bob in product development makes a few late payments on his credit card, and misses his mortgage for the second month running – how will this really impact his employer?

According to numerous economists and HR professionals, Bob’s money matters really do make a difference to a company’s performance. In a recent survey, 83% of the HR pros questioned acknowledged that an employee’s personal debt makes a ‘large’ impact to a business.

Not only was absenteeism and late arrival to work problems cited by the professionals surveyed – once at work, it seems that employees who struggle financially find it hard to switch off from their worries, to focus on the duties of their role. Whilst this impacts employee productivity and performance, as well as the overall morale of the team, some HR professionals also pointed out the risk to health and safety if an employee’s mind is not on their job.

Minimum wage or living wage?

In April 2017, the minimum wage rose for workers aged 25 years and over, to £7.50 per hour – an increase of 30p. Even that isn’t enough, according to campaigners for the much fairer ‘living wage’, which they believe should be nearer £10 an hour, taking into account rising inflation, higher food prices and increased rent and energy costs, amongst other things.

There’s no doubt that many of the people currently living on the breadline would agree that the living wage would ease their worry and sleepless nights. But some economists think it wouldn’t make much difference to employees who are heavily in debt – who aren’t necessarily those working on the bottom rung of a company. They say that personal debt is a much more complex issue than low pay, and that financial problems can affect even higher-rate taxpayers and the big earners sat at the top of a company’s structure.

Employers’ solutions

This isn’t a problem that’s just sprung up…plenty of people struggling with their finances have been in such a position since the recession started. But it seems that it’s only in the last few years that employers have realised the impact such problems can have within the workplace.

Some organisations have brought in financial advisors or created schemes that educate their employees on money management. We agree that this is beneficial; such schemes can help employees finally take control of their debt. The pressure and struggle can lift instantly, and after all, a worry-free, content, happy, motivated worker is every business owner’s dream.

However, this type of solution is a little simplistic. Solving the problem on a practical level is one thing, but if someone has been in debt for close to a decade, it’s likely that they will have deeper, longer-lasting issues – particularly surrounding their mindset and behaviours – which could still affect the employee’s performance.

By-products of long-term debt

Depression is a common side effect of serious financial problems, as is low self-worth and damage to one’s self-esteem. Absenteeism may, therefore, still be a problem with employees, months after their finances have established some grounding.

According to research, resentment is also an issue within those suffering money problems. Why did it happen to me? Why can’t I afford to go on holiday/send my kids to university/buy a new car? What will happen when I retire and I’ve got nothing to live on? With worries like this, you can see how someone’s day-to-day tasks and duties could be pushed down their priorities list.

Being physically present at work does not necessarily mean an employee is there mentally. And it’s this element that will have the lasting impact on your company, long after the financial advisor you invited in has moved on to their next client. The latter represents a sticking plaster – debts are now being managed, employees’ pressure has lifted (slightly), but the emotional effects of long-term debt are the real aspects that need to heal. Throw in anger, frustration, shame, embarrassment – and good old fear – and you get an idea of what will be going on underneath the surface.

How coaching can help

Personal, one-to-one coaching can unpick the negative thought patterns that take up residence in employees’ brains – the ones that will still creep into their psyche, even if, on a practical level, they’re getting help with their debt. This type of workplace coaching can be done in groups, though you’d need to respect that the topic of money is a personal issue, and not, therefore, one that many people will want to explore in-front of their colleagues.

We’ve talked many times on the benefits of an innovative workforce, and how it’s only this that will truly move your business forward. But even if you give your employees the freedom to think outside the box and the permission to take risks, it’s not going to happen if they feel imprisoned by their personal situation and the limitations crippling debt can bring.

They say that money is the root of all evil. Ask anyone struggling with their finances, and they’d agree with you. Lifting the worry of debt on a practical basis is a must, but lifting your employee from the effects that will be surrounding their debt is the key to improving their performance.

If you’d like Emerge to coach teams, departments or individuals within your organisation, or if you’re an individual who would benefit from a confidential, effective sounding board and facilitator, contact us on 01329 820580, or email us at info@emergeuk.com.

Thanks to atibodyphoto at freedigitalphotos.net for use of the image.

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