Financial wellbeing in the workplace: an evidence review

• Context
• The study
• Key findings
• Points to consider

Context

The review presents an overview about what is known in the scientific literature about the impact of financial distress on workplace performance.

Financial distress (a symptom of poor financial wellbeing) has important implications for both wider employee wellbeing and performance and money worries are known to affect 47% of UK employees (Good Work Index, CIPD, 2018).

The CIPD is the professional body for HR and people development and commissioned the CEBMa to carry out this rapid evidence assessment in 2021.

The study

The CIPD commissioned this systematic review to explore five questions:

1. What is meant by financial distress? (What is it?)
2. What is the effect of financial distress on workplace performance?
3. What is known about possible moderators and/or mediators that affect the relationship between financial distress and workplace performance?
4. What is known about strategies that may be beneficial to relieving financial distress and what is known about their effect?
5. What is known about measuring (causes of) financial distress?

Key findings

Q1: There is some inconsistency in defining financial distress.

• It has been referred to as ‘economic stress’, ‘economic hardship’, ‘economic strain’ and ‘economic pressure’ but the common element of each has ‘financial wellness’ as the overarching construct.
• The report presents a financial wellness model which includes objective financial status (such as the ‘financial ratios’ between liquidity, debt and assets), subjective financial status (e.g. satisfaction), financial attitudes and knowledge, and financial behaviour (such as following a spending plan).

Q2: The relationship between financial stress and workplace performance is increasingly recognised.

• Poor financial wellness is associated with higher rates of presenteeism and absenteeism, and lower levels of health.

Q3: The effect of financial distress is moderated and/or mediated by several factors.

• Differences in financial wellness between individuals finding themselves under the same circumstances can be explained by the influence of moderators and mediators such as age, education, marital status and personality traits.

Q4: There are few studies which look at interventions aimed at alleviating financial stress, but the report suggests a combined approach may be most beneficial.

• a. To improve financial wellness, the most mentioned remedy is to improve financial literacy by providing financial education.
• b. Another way to alleviate financial distress is by offering credit counselling or debt management programmes.
• c. The review summary also highlights the importance of involving employees in the development of relevant workplace strategy and interventions.

Q5: The Personal Financial Wellness Scale (Prawitz et al 2006) was the most frequently cited scale in the articles reviewed. This is a self-reported subjective measure of financial wellbeing where a low level of financial wellbeing corresponds to a high degree of financial distress and vice versa.

Points to consider

• Methodological strengths/weaknesses: The search strategy, selection of studies and critical appraisal methods are clearly documented and robust.
  The researchers noted the limited number of studies and the limited robustness of the research designs of the studies within this review.
• Relevance A useful review of the evidence around financial distress and its measurement.
• Generalisability/ transferability: This report is applicable to anyone with an interest in understanding how to measure or develop financial wellbeing in a workplace setting, but insights could apply to working-age adults in other settings.