Workers feel the burden of financial insecurity

When British grocer Tesco attempted to alleviate the financial pressures its staff were facing during the UK cost of living crisis last year, it started offering a range of perks usually reserved for higher earners.

Employees were provided with access to private doctors, nutritionists and sleep specialists, alongside a pay boost and financial education programmes.

For Tesco, and other employers that rely on lower paid or minimum-wage staff, there is good reason to improve staff wellbeing. Low pay and a lack of financial security is a clear factor in poor mental and physical health among workers, according to multiple studies.

“There is a really strong relationship between financial insecurity and health and that is most starkly felt when it comes to people on the lowest incomes,” says Sharlene McGee, policy manager at charity The Health Foundation. “They are almost twice as likely to have poor health than people on the highest incomes.”

And, in the UK, this problem looks to be worsening. A report published by the charity last month found that, by 2040, people in the most deprived 10 per cent of areas of England can expect to be diagnosed with a major illness a decade earlier than people in the most affluent 10 per cent of areas. It forecast that 3.7mn people of working age in England will be living with serious illness by then, compared with 3mn in 2019.

There are many reasons for this discrepancy: people on low pay are more likely to live in poor-quality housing, have difficulty providing food for their families, and have insecure employment, or zero-hours contracts, which can contribute to stress. In terms of physical health, lower-paid jobs are more likely to involve manual labour that puts more strain on the body than professional office jobs. Conditions such as diabetes and heart disease are also more prevalent among low earners.

Companies can improve financial wellbeing [of employees] — and have a positive effect — without changing salary

The Covid pandemic was an extreme example of how lower-paid workers can be more exposed to ill health. While professional office workers were able to work from home during lockdowns and beyond, people in jobs such as healthcare, construction, manufacturing or logistics, for example, were unable to do so, and were more likely to die from the virus, according to the Trades Union Congress, the union federation.

Dan Witters, research director at Gallup, agrees there are clear links between mental wellbeing and financial security, and says these are most pronounced at the lowest end of the pay scale. “Money matters when it comes to mental health outcomes but, with a lot of them, only up to a certain point,” he explains. “The probability that you will experience significant stress on any given day comes down as income goes up, and peaks out at about $90,000 per year.”

This suggests that, once the costs of basic life necessities such as food, shelter and healthcare are met, the links between wealth and health weaken.

For employers, stress and ill health among staff is a significant problem. It makes staff more likely to miss work or be less productive when they are there.

“Financial stress is debilitating for workers, and ultimately companies, too,” says Alastair Woods, workforce transformation partner at PwC. The consultancy’s research into the financial wellness of employees showed “economic stress — in addition to harming people’s emotional and physical wellbeing — hurts their productivity and engagement”. Financially stressed employees were nearly five times as likely to say that personal finance issues had been a distraction at work, the report found.

Research from Deloitte made similar conclusions. A survey conducted by YouGov for the Big Four consultant last year found that 14 per cent of respondents who were worried about their personal or family’s finances had missed work due to mental health problems, compared with 7 per cent of respondents who did not report money worries.

To break the links between financial pressure and ill health, there are some actions employers can take beyond raising pay, to help educate and support staff. “Companies can improve financial wellbeing [of employees] — and have a positive effect — without changing salary,” says Witters. “That comes from providing learning programmes in the workplace that help teach people how to do more effective budgeting and [use] the different saving tools available.”

He notes that employers can help staff learn how to manage their money to have financial security. “A lot of low-income individuals are good at living within their means — they don’t borrow, they save what they can. It reduces stress and the chance they will be diagnosed with depression.”

Elizabeth Hampson, a partner at Deloitte, says employers must acknowledge that worsening health among the working-age population is a “really big business need”.

“They have to recognise the impact this will have on recruitment and retention . . . employers are already starting to see issues in terms of shortages,” she points out.

As well as better education on financial matters, worker groups, such as the TUC, would like improvements to statutory sick pay, which is lower in the UK than most of Europe, making it harder for people to take the time off they need.

“Forms of insecure work have remained extremely high and there are strong links between stress and long hours and poor health,” says Tim Sharp, senior employment rights officer at the TUC. “It is really important to deal with zero-hours contracts and couple that with [ensuring employers give] decent notice and compensation when shifts are cancelled.”