Driving financial health and wellbeing in the workplace

  • By Anna Shaw

Financial stress is not a new phenomenon, and in 2018, research funded by AMP showed that one in five Australian employees were financially stressed. 

Dr. Vinita Godinho, managing director of Financial Resilience Australia, has been investigating financial stress in Australia with a particular focus on the ‘working poor’, a segment of the employed population who the International Labour Organisation (ILO) defines as people who are working yet unable to meet ends meet, and where being employed does not guarantee them substantial living conditions. 

Godinho notes that “the financial crisis triggered by COVID-19 will significantly increase the number of stressed employees in Australia… when business confidence drops, the economy suffers”. Godinho has identified a framework for building financial resilience in workplaces based on global disaster-recovery principles, with practical steps including: Refocus; Refresh; and Restart.  

Financial resilience refers to an individual’s ability to bounce back from financial setbacks, and depends on multiple factors including access to financial services and products, financial literacy and capability, personality and behaviours. 

Research also identifies that resilience is influenced by external factors, including the socio-economic characteristics of ones’ household, and the community in which individuals live and work in. Certain groups such as those on low incomes, women, young people and those without secure housing are more likely to have low financial resilience. 

Godinho fears that a financial shock such as COVID-19 is therefore likely to be disproportionately impacting these groups.    

Research conducted by RFi Group over the last quarter shows that nearly 10 million Australians have seen, or expect to see, a decline in their income as unemployment and under-employment rise. 

Those under the age of 35, contractors, the self-employed and those in casual roles are more likely to have been impacted. 

RFi Group data also highlights that 1 in 4 (28 per cent) Australian consumers feel overwhelmed by financial burdens, with those aged under 35 the most likely to feel overwhelmed (41 per cent). 

The link between income and access to financial services and products is also revealed in Victoria, where the above-average actual or expected income reduction triggered by the second wave of COVID-19 has led to even higher levels of mortgage repayment stress compared to consumers living in other states or territories.

RFi Group data also shows that the key factors driving consumer concern about personal finances include reduced working hours (either for oneself or someone in the household), being made redundant or seeing an expected reduction in salary. 

Other factors influencing financial stress include general uncertainty about the future, concerns of a recession and increasing cost of living in a time where there are limited employment opportunities. 

Increasing financial stress amongst younger Australians is also evident in RFi group data which shows that consumers who hold a personal loan are the most likely to have seen their income decline, and those aged 18-34 are disproportionately likely to use personal loans to cover living or unexpected expenses. 

Younger Australians are also more likely to be caught out by unexpected bills and recurring payments (1 in 3 indicate this compared 1 in 5 across the total market) and to put off paying their bills to the last minute. 

RFi Group data also highlights that 1 in 4 (28 per cent) Australian consumers feel overwhelmed by financial burdens, with those aged under 35 the most likely to feel overwhelmed (41 per cent). 

When asked what financial institutions could do to help them cope with COVID-19, the top responses include financial assistance via reduced fees on banking products, and deferrals on credit card and loan repayments. 

Given the evidence that employee financial stress is costing Australian businesses $31.1 billion in lost annual revenue, according to the AMP report, Godinho recommends promoting financial wellbeing in workplaces including incorporating financial capability-building as part of professional development and training, to encourage employees to build positive financial behaviours such as setting up emergency savings buffers or making extra repayments onto credit products when they are able to do so. 

Godinho notes that this could be especially beneficial to younger workers, as research shows they are less likely to have funds available to cover unexpected expenses.  

Anna Shaw is the client insights manager at RFi Group