Rising employee absenteeism can be extremely harmful to a company, especially when key members of the team are frequently calling in sick. Many factors contribute to employee absence, but one of the biggest causes is the impact of financial stress on employee mental health. Below, we explore some of the main causes of employee absenteeism tied to financial stress and what proactive steps employers can take to reduce it.
What are the main causes of employee absence?
To address the underlying issues of absenteeism, we must first understand the contributing factors. Financial stress, and the resulting impact on mental health, is a major cause of employee absence that often goes unrecognised. HR news reported in March 2024 that 22% of workers borrow money from family and friends to make ends meet and 20% have taken on debt:
According to research carried out by a leading financial wellbeing and retirement specialist, WEALTH at work, and published in HR News, workers' biggest financial concerns included not having enough savings for unexpected costs (40%), being unable to save for the future (38%), being in debt (29%) and not being able to pay basic living costs including rent, mortgage payments, energy bills and food costs (34%).
So, before resorting to disciplinary measures, it's crucial to explore the financial challenges employees may be facing and how these affect their wellbeing. Once these issues are understood, employers can implement solutions that not only help employees but also reduce employee absences.
Stress and how it affects the workplace
Mental health is often seen as a taboo topic, particularly in professional environments. However, financial stress is a significant factor that negatively impacts mental health, leading to increased employee absence. Employees dealing with financial pressure often suffer from stress, anxiety or depression. These mental health challenges manifest in frequent sick days, reduced productivity and a general decline in workplace morale.
Surveys suggest that up to 42% of employees who call in sick do so because of mental health struggles, not physical illness. According to one study, 46% of people facing financial hardship also experience some form of mental illness. The cycle of financial stress worsening mental health, and vice versa, can be difficult to break, leading to long-term absenteeism.
Many employees are reluctant to disclose that their financial struggles are affecting their mental health due to fear of being judged or ridiculed. 24% of employees report being afraid to admit the true reason for their absence, and 27% feel that discussing mental health is taboo in their workplace. This culture of silence around mental health and finances only compounds the problem.
Poor workplace morale
Financial stress doesn't just affect individual employees; it can ripple across an organisation, lowering overall morale. When employees feel financially unstable or unsupported, their sense of value within the company decreases, leading to disengagement and absenteeism. Low morale can spread quickly, creating a cycle where the absence of employees becomes more frequent and workplace productivity declines.
Absenteeism can also affect those still working, leaving them feeling overworked and frustrated, which further contributes to a decrease in morale. It’s essential to foster a supportive environment where financial wellness is prioritised to break this cycle and boost employee morale.
Harsh management
While it’s necessary to enforce company rules and standards, a punitive approach to absenteeism - especially when it's linked to financial stress - can exacerbate the problem. Employees who are disciplined without understanding or compassion are likely to feel undervalued and unsupported, further harming their mental health and leading to increased absenteeism.
Instead, employers should focus on addressing the root causes of absenteeism, including financial stress, and work with employees to find solutions rather than disciplining employee with mental health issues UK or penalising them.
How to reduce employee absenteeism
Reducing employee absenteeism, particularly when linked to financial stress, requires a proactive approach. Below are five ways employers can address the issue, reduce employee absenteeism and create a healthier work environment.
Improve morale
One of the most effective ways to reduce employee absence is by improving workplace morale. Encouraging open communication about financial wellness and providing employees with opportunities to voice their concerns is an effective start of employee absence management. Implementing small changes, like signposting employees towards financial education or guidance, can significantly improve employee engagement.
Listening to employees and implementing changes based on their feedback can boost morale and show that you care about their wellbeing, both financially and mentally. When employees feel heard and supported, they’re more likely to remain committed to their work, reducing employee absences.
Reduce stress and burnout
Financial stress is one of the leading causes of employee burnout, which in turn contributes to absenteeism. Overworked employees who are also struggling financially are more likely to experience heightened levels of stress, which negatively affects their physical and mental health.
To combat this, employers should consider offering financial wellness programs as part of their benefits package. This can include helping them understand their budget, debt management, or access to financial counselling and support. Additionally, a more flexible work environment and adequate staffing levels can help reduce the pressure on employees, making it easier for them to manage their personal and financial lives.
Talk about mental health
One of the most impactful ways to reduce absenteeism is by fostering an environment where mental health discussions - especially related to financial stress - are normalised. Promoting employee mental health and wellbeing means encouraging open dialogue about the pressures employees may be facing and creating a culture where asking for help is seen as a strength, not a weakness.
By encouraging conversations about mental health and providing resources for financial wellness, employers will create a supportive atmosphere where employees feel valued and less inclined to take unscheduled time off. Financial stress is a common issue, and acknowledging it can go along way toward reducing its impact on absenteeism. Providing access to trained mental health first aiders in the workplace can help employees feel valued and give them somewhere they can go for support without stigma.
Provide access to support
Providing employees with resources to manage both their mental and financial wellbeing is key to reducing absenteeism. Ensure that your company offers robust mental health benefits, including access to Employee Assistance Programs (EAPs) that offer financial counselling.
Be flexible
Rigid policies and financial stress go hand in hand when it comes to increased employee absences. By offering more flexibility in terms of work schedules, sick day policies, and payroll options, employers can help alleviate the pressure employees feel to meet both work and financial obligations.
Giving employees access to a flexible payroll solution, like PayCaptain, can help reduce financial stress. Employees who have control over their pay with tools that help them reduce debt, give them access to a portion of their earned wages before their official payday, increase their savings through payroll, or split payments directly from net pay to avoid missing important payments are less likely to struggle with late bill payments and mounting debt, which can improve their mental health and reduce absenteeism.
By giving employees tools and functionality like online payslips or Plain Numbers payslips - designed for those with lower numeracy skills - employers can support their team by helping them become more engaged in their payroll.
By focusing on improving financial wellness, providing support and guidance, and destigmatising mental health in the workplace, companies can take proactive steps toward reducing absenteeism and help employees who are struggling financially.
*article updated in October 2024
