man in tie trying to balance between two walls Financially stressed employees are 2times less likely to get enough sleep, exercise regularly, eathealthy. (Photo: Shutterstock)

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Employers are starting to realize the impact of employeefinancial stress, for good reason — there is adirect correlation between the economic health of employees and the companies they workfor.

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Since nearly 60 percent of employees in the U.S. say they arefinancially stressed—more than all other lifestressors combined—employers should not only be concerned aboutthis problem, but also actively trying to solve it.

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Studies show that financially stressed employees are lessproductive, more distracted, produce lower-quality work, havepoorer relationships with co-workers and have higher rates ofabsenteeism and on-the-job accidents.

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Financial stress has been linked to post-traumatic stress disorder, substance abuse disorder, suicide, and mental health disorders, especially amongmillennials.

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U.S. businesses are losing $500 billion a year because ofemployees' personal financial stress, according to a survey bySalary Finance.

5 signs of employee financial stress

In order to solve the problem, however, employers must first beable to recognize it. Employee financial stress signs include thefollowing:

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1. Poor health When trying to cope with stress,your employees may experience poor health including digestiveissues, headaches, fatigue, depression, heart disease, high bloodpressure, diabetes, anxiety and increased susceptibility tocontracting viral illnesses like the cold and flu.

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To make matters worse, people experiencing high stress oftenneglect their health and/or delay seeing a doctor, causing healthproblems to worsen and become more difficult and costly totreat.

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A Fidelity Investments survey found that financially stressedemployees are two times less likely to get enough sleep, exerciseregularly, get a flu shot, go to the doctor and dentist, eathealthy, maintain a healthy weight and avoid tobacco use.

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Employers can end up paying more due to higher use of employeeassistance programs, higher health care costs, increasedabsenteeism and more on-the-job, stress-related employeeaccidents.

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2. Absenteeism

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Employees experiencing financial stress are more likely tohabitually miss work. Absenteeism costs U.S. companies a whopping$226 billion a year, according to the CDC Foundation.

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A Fidelity Investments well-being survey of more than 9,300 peoplefound that employees with the highest levels of debt were twice aslikely to miss work as those with the lowest debt levels.

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3. "Presenteeism"

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Presenteeism is the term used for employees who are physicallypresent at work but performing their jobs at less than fullcapacity. Presenteeism shows itself in a number of ways, includinghigh levels of distraction, low engagement with work andcolleagues, poor work quality and declining job performance.

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The 2019 PWC Employee Financial Wellness Surveyfound that 35 percent of employees were distracted at work due tofinances. Of those distracted, nearly half spent 3 or morehours per week handling financial issues.

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Salary Finance found that financially stressed employees lose 23to 31 days of productive work per year and are 2.2 times morelikely to look for a new job.

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4. Delayed retirement

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If an employee does not have enough retirement savings and/or isburied in debt, they often have no choice but to continueworking past their planned retirement age. Prudential found that 57percent of finance executives say delayed retirements can beattributed to lack of retirement savings.

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This can be expensive for employers, with increased annual costsof 1 to 1.5 percent. Workers delaying retirement usually have morepaid sick leave and vacation days along with higher life,disability and health insurance costs.

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People staying in the workforce longer has a trickle-downeffect: Younger employees have less opportunities for advancement,leaving them with stagnant wages on top of student loan debt.Studies show young adults are delaying homebuying and starting families because of this combination offinancial factors.

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5. Making hardship withdrawals

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Employees can withdraw money from their 401(k) if they findthemselves in a financial crisis and meet the criteria for ahardship withdrawal. According to the IRS, allowable hardshipwithdrawals must create "an immediate and heavy financial need ofthe employee," such as medical expenses, preventing eviction orforeclosure, funeral expenses and some qualifying home repairs.

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According to Fidelity Investments, the average amount ofhardship withdrawals is $2,900, and the two biggest reasons are theprevention of eviction or foreclosure and medical bills.

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Hardship withdrawals hurt both the employee and the employer.The employee will see increased taxes, potential withdrawalpenalties and less money for retirement. In fact, taking a hardshipwithdrawal can decrease retirement savings by 14 percent, accordingto a study by MassMutual.

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For an employer, a hardship withdrawal is seen as plan leakage,which costs money in higher per-account fees.

Solving the problem with employee financial wellnessprograms

One way that organizations are solving the problem offinancially stressed employees is by providing a financial wellnessprogram as part of the benefits package. According to The Business Case for Financial Education, anemployer-offered financial wellness program can have a return oninvestment of 300 percent in the first year by decreasingabsenteeism and presenteeism, as well as increasingproductivity.

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However, not every financial wellness program is equal. To findthe right program, look for one that offers the following:

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●      Valuable for all employees, with content that adapts to each user'sage, financial situation, life stage, etc.

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●      Interactive, with features like video and gamification to increaseengagement.

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●      Unbiased: The platform should not pressure users to buy aparticular product or service.

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●      Recognized: Seek referrals, read reviews, etc.

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If the signs of financial stress are evident in your company, itis time to find a financial wellness program that benefits bothyour organization and its greatest asset—employees.

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Kris Alban is executive vicepresident of iGrad, a San Diego-based financial technology companythat provides artificial intelligence-powered financial wellnesssolutions to employers, financial institutions, colleges anduniversities. Its Enrich Financial Wellness platform isused by more than 20,000 employers and more than 300 financialinstitutions to provide behavior-changing financial literacyeducation to employees, customers and members.

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