Consumer debt has a hidden impact on the American workplace, study finds

0

SAN MATEO, Calif., March 9, 2022 /PRNewswire/ — After more than two years of battling the COVID-19 pandemic, many workers across the country are struggling with their personal finances, and in particular their debts. A new study by the association Financial Health Network and sponsored by Liberty Financial Network reveals that debt affects employee productivity and retention, and that debt-related financial wellness benefits offered by employers are relatively rare.

“From increased stress levels to reduced productivity at work, the far-reaching effects of personal debt on the lives of workers are both surprising and concerning,” said Sean Renard, president of Freedom Debt Relief and chief revenue officer of its parent company, Freedom Financial Network. “Today, the financial health benefits offered by many employers focus primarily on the future financial situation of workers, such as planning for retirement. Meanwhile, benefit programs often miss the mark when it comes to helping employees improve their current financial well-being, or even their financial situation. literacy, needs.”

Debt impacts physical health and job performance

Financial Health Network surveyed U.S. consumers who work full-time in medium and large companies with 500 or more employees, a cohort that made up 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 Benefits to Meet Employee Needs and Preferences, found that 63% of these workers had unsecured debt in the form of credit card balances, medical loans or personal loans. It is on this subset of workers that the study focuses.

Of those with unsecured debt, 65% said debt stress had an impact on their physical health. Additionally, almost half (47%) of respondents said they had not been able to pay all their bills on time at least once in the past 12 months. A third (32%) said they or someone in their household had struggled to pay their medical bills in the past year – with half of respondents saying they had to cut spending to basic needs such as food and clothing to pay medical bills.

Other key findings:

  • Almost half (47%) of respondents with $25,000 or more with unsecured debt said they were worried about whether they could afford to buy groceries.
  • 34% more employees $25,000 debt and 24% of those with less than $10,000 indebtedness reported that a member of their household had stopped taking medication or had taken less than prescribed because they could not afford it.
  • 32% of all respondents said they had trouble paying their rent or mortgage.

The challenges many consumers face with debt often extend to the workplace, as nearly 40% of respondents with unsecured debt missed at least one day of work in the past 12 months due to stress or debt problems. In addition, 50% of people in debt spent an average of one hour a week at work dealing with debt-related issues, the equivalent of an entire week of lost productivity over the course of a year.

The financial benefits of wellness are largely absent from the American workplace

Financial Health Network asked respondents about their access to 13 types of debt-related financial wellness benefits, including education and general purpose financial tools; personalized advice; employer-sponsored financial assistance; and payday advances, loans, debt consolidation or other debt relief products. Overall, the study revealed that access to these benefits is extremely limited. To make matters worse, employees who would benefit most from financial wellness benefits, such as those with higher total debt and debt stress, as well as those with lower incomes, have the less access to these programs:

  • None of the 13 types of financial wellness benefits covered in the study were available to the majority of respondents
  • 1 in 5 respondents said they don’t have access to any of the financial wellness benefits discussed in the study
  • 31% of respondents with annual income above $150,000 had access to debt consolidation loans or other forms of debt relief, compared to only 9% of those earning less than $50,000 per year.

“While benefits that can help employees deal with debt and manage finances are relatively rare in the workplace, these programs and tools can significantly improve worker productivity and retention,” Fox explained.

For example, the majority of respondents believe that the financial benefits of debt have their place in the workplace. The study also found that 62% of respondents said they would be more likely to stay in a job that offered helpful debt-related benefits.

The study identified key points that employers can use to design more effective benefit plans:

  • Debt affects the use of retirement savings accounts by employees. Employees with higher levels of unsecured debt were more likely to withdraw money from retirement accounts. Employers should understand that traditional workplace retirement savings accounts may be less relevant for employees whose debts require them to meet their daily needs.
  • Gaps exist between need and access to benefits. Workers with higher total debt, low-income employees and female employees were more likely to say they do not have access to debt-related benefits, despite reporting higher levels of debt-related stress. to indebtedness, indicating a mismatch between benefits and those who need them most .
  • Gender and income play a role. Women were significantly less likely to report using debt-related benefits when employers offered them. Those with the highest debt reported having less access to debt-related benefits. Those who earn less than $100,000 were much less likely to report that their employer offered debt-related benefits.

“Impressively, we saw that at least 40% of respondents who do not have debt-related benefits say they would be somewhat or very likely to use them if offered by their employer” , Fox said. “By tailoring debt benefits to employee needs and preferences, companies can leverage these underutilized tools, achieve measurable results, and help employees move forward in creating a better financial future.”

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

About Freedom Financial Network

Liberty Financial Network is a leading digital personal finance company. We do what traditional banks don’t: put people first. Our solutions help everyday people engage and stay on the path to a better financial future, through innovative technology and personalized coaching. Leveraging proprietary data and analytics, our solutions are tailored to every stage of a consumer’s financial journey and include personal loans (LibertyPlus), home equity loans (Ready), debt assistance (Debt Relief Freedom), and even financial tools and education (Bills.com). Freedom Financial Network has more than 2,300 dedicated employees across California, Arizona and Texas and is recognized as a Best place to work.

For more information on career opportunities at Freedom Financial Network, visit: https://jobs.freedomfinancialnetwork.com/

SOURCE Freedom Financial Network

Share.

About Author

Comments are closed.