The Link Between Financial Wellbeing and Mental Health
10th July 2018
Last year’s Stevenson/Farmer review of mental health in the workplace painted a stark picture of the impact mental health difficulties are having on UK employers.
In its report Thriving at Work, the Steven/Farmer commission concluded that poor mental health costs employers between £33 billion and £42 billion a year, with an annual cost to the overall UK economy of between £74 billion and £99 billion.
Though the economic and human cost of poor mental health in the workplace is enormous, employers often struggle to identify and address the underlying causes. However, research into the issue has consistently identified one leading cause of mental health difficulties: financial distress.
In May of 2017, the Money and Mental Health Policy Institute released a report that developed the link between poor mental health and financial problems such as debt and chronic lack of savings.
According to the report, of employees who identified themselves as “financially comfortable,” 41% reported at least one sign of poor mental health. However, this figure rises to 51% for those describe themselves as “just about managing,” and 67% for people in financial difficulty.
The survey describes concrete ways in which financially-induced stress hurt an individual’s ability to work. Respondents described symptoms including difficulty concentrating, loss of sleep, feeling additional pressure, and reduced motivation.
For many people, money and mental health problems operate as a dangerous feedback loop: money difficulty can trigger mental health problems, which can in turn jeopardise a person's income and prevent them from taking the steps necessary to reaching financial security.
Money and Mental Health suggest steps that employers can take to alleviate these issues for their employees, all of which can be addressed by financial wellbeing benefits:
- Boost short term savings: Whilst there has been much progress in facilitating the long term savings of employees through auto-enrolment pensions, many individuals still experience difficulties when it comes to unexpected expenses in the short term, which still forces them to seek high-cost credit. One solution could be to help employees build emergency savings pots with automated contributions drawn from payroll. Access to savings of just £1,000 could protect half a million households from problem debt.
- Support access to affordable credit: Financial difficulties are often caused or worsened by a lack of access to affordable credit, with 52% of research participants suggesting that the provision of affordable credit products through payroll would have helped them in situations of financial distress.
- Financial capability: research has shown that general financial education might not necessarily help in situation of financial difficulty. Access to tools, apps and personal advice can help people to understand and manage their money better.
By providing practical financial support, employers can help manage or mitigate a common cause of mental health issues within their workforce.
Salary Finance provides a free financial well being platform for employers, and helps employees to pay off debts, save regularly and learn better financial habits. A recent analysis conducted by researchers at Harvard’s Kennedy School found that Salary Finance’s low-cost, payroll-linked loans saved employees 31% on interest expenses, and that retention was 28% higher for eligible employees who utilised this solution than those who did not.
This suggests that addressing financial wellness through employer-sponsored benefits could bring significant benefits for both employees and employers.