Employers, your employees carry record levels of household debt -and it directly impacts your business. The majority of Americans now call finances their biggest source of stress. The proportion of people who call their debt unmanageable has increased from 38% to 42%, in the past year alone. Credit card debt is the highest it’s been since 2003, and serious debt delinquencies are the highest since 2012.
We at Brightside see the type of debt challenges employees face firsthand:
- Debt is the second most common reason employees come to Brightside for help, after money emergencies.
- Credit card balances are the top debt concern for 80% of Brightside users.
- 45% of Brightside users are either struggling to make debt payments or already have debt payments that are past due.
Your employees’ financial problems cannot be addressed with financial education, a financial plan, or a 401(k). Their situations are urgent and complex and demand more care than a financial wellness benefit can offer. Many are turning to credit cards, payday loans, and earned wage access to keep up with their day-to-day financial needs. This leads to a vicious cycle of financial illness and stress that affects you as their employer. Here’s why addressing employee debt is a smart business move.
1. Debt drives employee financial stress
Nearly 40% of employees cite debt as their top financial stressor and three-quarters of workers say their household’s level of debt is a problem of at least some significance, according to the 2023 Workplace Wellness Survey by EBRI and Greenwald.
When employees cannot manage their debt balances and continue to borrow, their debt utilization climbs. This can negatively impact an employee’s credit score, perpetuating their financial illness. This stress is not just a personal issue; it spills over into your workplace.
2. Financial stress is a costly workplace distraction
More than half of the employees surveyed by EBRI said financial worries distract them from work. The anxiety and frustration caused by debt can erode employees’ focus and productivity, and lead to physical and mental health challenges. Ultimately, this affects your bottom line and drives your healthcare costs higher.
3. Financial insecurity drives turnover
The majority of employees (68%) surveyed by EBRI said their employer has a responsibility to make sure they are financially secure and well. Employees burdened with debt may seek higher-paying jobs (even if the pay increase is nominal), or a job that offers financial health benefits that can address their day-to-day financial pressures, including debt. For your business, this means higher turnover rates and recruitment costs.
4. Frontline employees get hit by debt the hardest
Just one out of seven frontline employees is considered financially healthy. Many are in debt because they struggle with the costs of necessities such as housing and transportation and don’t have a savings safety net.
In addition, nearly one in five cardholders use at least 90% of their credit limit, and low-income individuals are more likely to fall into this group. When the inevitable unexpected expense or financial shock happens, even for a minor car repair like a flat tire, they have no choice but to borrow – no matter what it might cost. Financially vulnerable employees spend 16% of their income on debt-related interest and fees (compared to the 1% of income financially healthy individuals spend on it), exacerbating their financial illness.
5. Financially Ill employees lack affordable financial options
Employees with high debt relative to their income and other assets may also have subprime credit scores. This further limits their access to affordable debt management solutions and makes them more likely to fall behind on other bills. If they continue to miss payments, past due debts can be turned over to collections, and possibly lead to bankruptcy and wage garnishment.
Left untreated, these events can plunge the employee further into financial illness, leading to crises including housing and food insecurity.
Employees need financial benefits that offer real debt solutions
Investing in your employees’ financial health requires solutions beyond financial wellness. With Brightside Financial Care, your financially ill employees get the personalized non-judgmental support and real solutions they need to manage their debt, save money on interest, pay off debt faster, and resolve urgent situations including past due debt in collections. Once they receive treatment for their urgent financial needs, they can begin to build financial stability and improve their financial health. In turn, your business is rewarded with a more stable, productive, and loyal workforce.
To learn more about Brightside Financial Care and why Amazon and other Fortune 500 employers trust us to treat employees’ financial illness and improve their financial health, click here.
