The critical link between emergency savings and workplace productivity

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Devin Miller
January 18, 2024

Emergency savings play a crucial role in alleviating financial stress in American workers. By providing a financial buffer, these funds can help employees manage sudden or unexpected costs without resorting to high-interest loans, increasing credit card debt, or depleting their retirement savings. 

Understanding the profound impact of emergency savings on workplace productivity begins with recognizing the relationship between an employee's financial well-being and their effectiveness at work. When an individual’s financial stability is fostered, their ability to engage at work increases. Let’s take a look at the research.

The toll of financial stress on productivity

Financial stress has far-reaching negative effects on employee focus, motivation, and job performance. Financially stressed employees often struggle with concentration, reduced motivation, and diminished job performance, leading to a notable decrease in overall productivity.

According to a 2023 report by PwC, 60% of full-time employees are stressed about their finances, a figure that has risen even higher than its peak during the COVID-19 pandemic. 

This stress is not confined to lower income brackets; nearly half (47%) of employees over $100,000 annually also report financial stress. Financial worries are known to significantly impact many areas of an employee's health and well-being, including mental health, sleep, self-esteem, physical health, and interpersonal relationships​​.

Employees themselves are aware of the critical connection between financial stress and productivity. According to a different PwC study, 63% of employees said financial stress was impacting their productivity. This stress is even more pronounced among younger generations who tend to have a lower net worth and less retirement savings due to fewer years in the workforce: 72% of Millennials and 68% of Gen Z reported financial stress. Furthermore, the study documented a correlation between employees’ financial stress and the employer’s bottom line in terms of productivity, retention, and physical health​​.

Financial stress isn’t just associated with low salaries; it can encompass a range of factors including: 

  • A lack of growth or advancement opportunities 
  • Poor or insufficient employee benefits
  • Unexpected costs or expenses
  • Credit card and student loan debt
  • Life changes or added financial responsibilities, like a new baby, paying for a child’s college education, or an ailing family member. 

The impact of financial stress extends into various dimensions of work life. Employees grappling with financial concerns are often less engaged, less motivated, and their cognitive bandwidth is significantly reduced due to their preoccupation with financial woes. This can lead to a decrease in the quality of work, increased absenteeism, and a higher likelihood of mistakes at work.

Emergency savings as a productivity booster

An emergency fund is a financial safety net, which employees can use to cover unexpected financial challenges with confidence. This assurance can lead to a workplace where employees are more present, focused, and less distracted by financial worries.

A robust emergency savings fund can be particularly influential in an employee's life. Our recent SecureSave study found that, in the past six months, 38% of respondents had experienced a financial emergency that they believe affected their work performance. The presence of an emergency fund can deter the need for high-interest loans, which can spiral into further stress and absenteeism. This financial cushion thus helps protect both the financial and mental well-being of employees. 

Research from the National Fund for Workforce Solutions (NFWS) shows that companies offering holistic financial wellness programs that contain a savings component experience a range of positive impacts to the organization, including:

  • 43% increased employee engagement
  • 40% improved productivity
  • 36% decreased financial stress
  • 23% reduced employee absenteeism 

Considering this data, it’s clear that financial stability, achieved at least in part through emergency savings, helps support employee productivity by providing employees with a sense of security that empowers them to commit their full attention and resources to their work. Without the looming threat of financial disruption, they’re able to focus more attention and energy to their work responsibilities. 

Given this connection, HR professionals and company executives are increasingly recognizing the value of integrating emergency savings initiatives into their employee benefits programs. Essentially, offering employees a workplace emergency savings program is an investment in the workforce’s financial and mental resilience, and by extension, the company’s productivity and success.

Case study: Workplace emergency savings and productivity gains

Research correlating emergency savings to workplace productivity is still in its infancy. However, a recent research study out of the University of Pittsburgh revealed promising findings. As part of the study, the transportation and logistics company, Pitt Ohio, instituted an emergency savings program for its drivers that enabled employees to contribute via an automatic payroll deduction. As part of this program, the company provided an incentive match for those who contributed to their emergency savings for an entire year. 

As a result of their workplace emergency savings program, participating employees enjoyed increased levels of emergency savings, and the company observed enhanced driving safety among its most financially precarious drivers​​.

Over 1,400 drivers participated in the program, totaling a 76.8% participation rate in the initial first year. The program’s results were definitive—drivers who had been more concerned about their financial status prior to the program exhibited a decrease in driving citations in the following year. Additionally, for those who experienced financial setbacks, the increased emergency savings acted as a buffer, leading to improved driving performance​​.

From a cost-benefit perspective, the emergency savings program was a win-win. The direct costs of the incentive match for the organization totaled less than $119 per employee annually, amounting to less than $100,000 in direct and indirect costs for the company over the year. When compared to the significant costs associated with commercial truck accidents, the savings in potential accident costs were substantial, in addition to the invaluable benefits of improved employee well-being and safety​​.

Measuring and quantifying productivity impact

To measure the tangible impact of emergency savings on productivity, companies can adopt a multifaceted approach by tracking various key performance indicators (KPIs) that combine to reflect the success of this financial wellness initiative. These metrics might include:

  • Frequency of payroll advances - Monitor any changes in the number of payroll advances requested, which can reflect employees' improved ability to handle unexpected expenses.
  • Emergency loan requests - Track reductions in requests for emergency loans, indicating better financial preparedness among employees.
  • Absenteeism rates - Compare absenteeism rates before and after program implementation to measure the influence of financial stability on employee attendance.
  • Employee retention rates - Observe retention rates to assess whether the financial wellness program impacts employee loyalty and turnover.
  • Performance reviews and productivity scores - Evaluate changes in work quality and efficiency noted during performance evaluations to gauge productivity improvements.
  • Employee engagement surveys - Utilize surveys to measure shifts in employee perceptions of financial well-being and support from the company.
  • Cost-benefit analysis - Conduct analyses comparing the costs of the emergency savings program against savings from reduced workplace issues to determine ROI.

By monitoring these KPIs, organizations can gain valuable insights into the effectiveness of emergency savings programs and their impact on productivity. Monitor changes in KPIs and adjust your program as needed to help make it as effective as possible for your employees.

Implementing emergency savings at your workplace

As we’ve seen, the link between emergency savings and employee productivity is clear and compelling. By providing employees with a financial safety net, companies can significantly alleviate the stress associated with unexpected expenses. This financial security translates into a more focused and engaged workforce.

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