Financial wellbeing

• The share of employees reporting financial difficulties has remained stable during the pandemic, with more than a third of employees (37%) living paycheck to paycheck, approximately the same number as in 2019.
• But many employees face a precarious state Roughly a quarter (24%) say their finances have worsened over the past six months. Nearly four in 10 employees (37%) have been unable to pay bills, are carrying over interest charges for a sustained period, or have had to borrow money from family and friends. At the same time, slightly more than one in five (22%) say that their finances have improved.

• Employees who had their hours cut (61%) report less financial security, while the employees who have increased their work hours due to the pandemic (43%) report increased financial security.

  Even some higher-wage earners, including 16% of those earning $100,000 or more per year, experienced a worsening financial situation. But the pain sets in more quickly for low-income employees, who are less likely to have emergency savings to buffer a financial shock.

• Among employees who have seen their financial condition worsen in 2020 are those who earn less than $50,000 a year, are in poor health, have disabilities and are single parents. Those who are higher paid, in good health and married with children have fared better.

• A majority of employees (53%) indicated that saving for retirement is the area where they most want help from their employer. Those in a poor financial position are also looking for more help addressing day-to-day financial challenges, for example, through services like short-term loans; those in a better financial position desire help getting more out of their benefits, for example, through the use of websites and tools that can improve decision making.

How are employees responding?

• Overall, households are spending less (30%) and saving more (31%). Two in 10 (23%) are taking on more debt.
  • Over four in 10 employees in a worse financial position are spending less (44%) and saving less (46%), and over a third of these employees (36%) are taking on more debt.
  • More than three-fifths of employees whose financial position has remained stable during the pandemic report that their behavior with regard to saving, spending and incurring debt has remained about the same.
  • Employees in a better financial position are spending (42%) and saving more (58%), and over a third (36%) are taking on more debt.
• One in four employees expect to retire later as a result of the pandemic, including half of those living paycheck to paycheck. Fifty-three percent of struggling employees accessed their retirement savings in 2020. These employees are more likely to have withdrawn large amounts (see section on retirement expectations below).

• Among the employees whose financial situation is improving, almost six in 10 (58%) say they are likely to take an extended vacation after the pandemic ends, while half (50%) indicate they have major spending plans.

  At the same time, eight in 10 struggling employees (those living paycheck to paycheck and who struggle to control spending) who are in a better financial situation report they are likely to take an extended vacation when the pandemic ends, and roughly three-quarters (76%) have some major spending plans. These employees may be missing an opportunity to get on a new, secure financial glide path.

  Those in a better financial position are more likely to have increased their working hours. But this improvement comes at a price. Over half of employees (51%) who increased their work hours during the pandemic indicate that they are likely to suffer from anxiety or depression.

  More than two-thirds (69%) of employees in a better financial position plan to be financially prudent, save as much as possible and pay off debt.

Impact on the workplace

• Employees in a better financial situation have higher engagement (46% vs. 24%) and lower presenteeism (12.7 days lost vs. 22.7 days lost) than those in a worsening financial position.
• Employees in a better financial situation are also more likely to report good health (75% vs. 35%) and high social wellbeing (50% vs. 25%) than those who are doing worse financially.
• Employees in a worsening financial situation tend to have poor lifestyle behaviors, including poor eating habits, tobacco use, and alcohol and substance abuse.

How can employers make a positive impact?

• Because the pandemic is affecting employees in different ways, it is essential for employers to take an inclusive approach and consider how they will meet the diverse needs of different employees.
• Many employees, including 59% of those who are struggling financially, indicate that guidance and advice on how to better manage their finances has become more important to them in the past six months.

Next section: Retirement expectations