The Impacts of Inflation on Employee Financial Wellbeing

Inflation is a term that has taken center stage for employers and employees alike. With rising prices, uneven wage growth, and credit card debt at record levels, the stressors on employees' financial health are escalating.

In PwC's Employee Financial Wellness Survey, new data is presented about how inflation is affecting employees and how employers can guide them through turbulent economic times.

Inflation's Ongoing Toll on Employees

According to PwC's research, a staggering 60 percent of full-time employees report being stressed about their finances, surpassing the levels observed even during the height of the pandemic.

With concerns mounting over wage growth lagging behind inflation, the impact of rising prices is evident. The survey found that 44 percent of full-time employees believe that inflation has caused major or severe impacts on their financial situation over the past year. In addition, 59 percent of full-time employees report that their compensation is failing to keep pace with the rising cost of living.

Basic expenses are becoming harder to handle for employees, as nearly 50 percent struggle to cover household expenses on time each month. Among employees carrying credit card balances, 44 percent struggle to make minimum payments, signifying the erosion of financial stability. Even employees earning $100,000 or more annually are not immune, with 15 percent reporting they often or always run out of money between paychecks.

These elevated levels of financial stress have far-reaching implications for employee health and wellbeing, impacting critical areas such as sleep, mental health, self-esteem, physical health, and even relationships at home. As employers navigate these changes, it becomes imperative to address employees' financial concerns to mitigate the negative consequences on their overall wellbeing.

Financial Wellbeing's Ripple Effects on Employee Engagement and Productivity

Employee financial stress isn't limited to personal finances alone; it seeps into the workplace, undermining productivity, engagement, and retention. A startling 33 percent of full-time employees admit that money worries have negatively impacted their productivity at work. This distraction due to financial concerns is 5x more likely among financially stressed employees compared to their counterparts.

According to PwC's research, financially stressed employees are also significantly less engaged at work. They're less likely to feel a sense of belonging, alignment with company values, energy at work, and pride in their employment. This disengagement also reflects in their likelihood to recommend their company as a great place to work. These findings underscore the close connection between employee financial wellbeing and overall company success.

Navigating Uncertain Waters: How Employers Can Make a Difference

To guide employees through these challenging economic times, employers must take a proactive role in supporting their financial wellbeing:

1. Provide Comprehensive Financial Wellbeing Benefits: Employers should offer a trusted financial wellbeing program that addresses immediate money management and long-term planning. Leading solutions today offer digital tools, interactive education and 1:1 guidance from Certified Financial Planner™ professionals who always act in employee's best interest.
2. Promote Total Rewards: Highlight the complete package of employee benefits and showcase how each benefit can address specific financial needs. This can help employees recognize the value of their benefits in the context of their financial requirements.
3. Offer Personalized Support: Recognize that employees are at different stages in their lives and careers. Tailor financial wellness communications to cater to their unique needs, ensuring relevance and effectiveness.
4. Cultivate Engagement Through Affinity Groups: Engage employees through affinity and employee resource groups where they feel comfortable discussing financial matters. This open dialogue can promote financial health and reduce the stigma around seeking financial guidance.

An Employer Call to Action

In a time marked by economic uncertainty, employers have an opportunity to become pillars of support for their employees. PwC's Employee Financial Wellness Survey highlights the profound impact of inflation on employees' financial wellbeing and its subsequent effects on productivity, engagement, and retention.

By understanding these dynamics and implementing targeted strategies, employers can contribute to not only the financial health of their employees but also the overall success of their organizations.