Destigmatizing debt in the workplace

Consumer debt in America continues to climb with no end in sight, with the average U.S. household owing more than $155,000 — an increase of more than six percent over last year. Homebuyers may soon be able to capitalize on a slowing housing market, but supply chain issues that arose during the pandemic continue, and federal relief measures to help American households are no longer in play. 

As debt continues to increase, so do financial shocks, which Pew defines as a significant loss of income or a major unexpected expense. Sixty percent of Americans experience  financial shock and one-third experience two or more per year. This puts more financial pressure on American families, nearly 70% of whom don’t have emergency savings.  These costs are typically around $2,000 — representing half a month of income for the median household. 

Depleting any existing savings is often the first option when employees are faced with a financial shock and, once they do, it’s not easy to build it back up. Nearly 50% of American workers who deplete their emergency savings have not been able to rebuild them. After that, many employees, especially those with subprime credit scores, are forced to turn to expensive sources of credit, especially sources where they can get money fast. Payday loans, online installment loans, pawnshops, and borrowing money from friends or family top the list. 

Financial shocks can take many forms. Shannon, who works at a hospital system in Nevada, needed $23,000 to repair the home where she lives with her daughter and grandchildren home after a flood destroyed it. For Jenell, a teacher who supplements her pay by traveling during the summer and training other teachers, COVID-19 cost her at least $10,000 in wages she depended on. Water heaters break, unexpected medical bills crop up, and the list goes on.

This has a profound effect on businesses. Employees dealing with high-cost debt are more likely to be experiencing financial stress, making them vulnerable to depression, anxiety, and troubled relationships with family, friends, and coworkers. They feel shame and panic and are constantly on edge, worried when the next financial storm will hit. At the workplace, half of employees with debt stress spend an hour per week on average dealing with debt-related issues at work. And they are more than twice as likely to seek another employer. 

Read more: Financial literacy matters to Gen Z — and they want employers to help them

With debt so prevalent, why is it still a taboo topic in corporate America? And, more importantly, how can business leaders change the tenor of the conversation regarding debt internally? 

Ending the stigma 
In the early days of the COVID-19 pandemic, businesses were on the path to becoming more empathetic — but not so fast. Only 13% of employees say they can talk openly about money at work and get the help they need and, in a recent Gallup survey of more than 15,000 workers, only one-quarter responded that they strongly agreed that their employer cared about their well-being — half of the percentage that responded that way in the early days of the pandemic. 

This is discouraging news for employees, many of whom fear exposing their financial shortcomings, believing that it implies weakness and that it could impact their standing in the workplace.  

Read more: It’s time for new financial security benefits that meet low-income workers’ needs

For employers to end the stigma of talking about finances — and debt, in particular — at work, they need to recapture that empathy they proved themselves capable of during the pandemic and create a culture of openness, support, and no judgment. 

Doing so builds trust with employees and, over time, loyalty. As one worker, Monique, said about her company offering well-being benefits, “It just made me like my employer more because they’re not just paying me, they’re also helping me in the financial aspect as well as health aspect as well as mental health.”

Implement programs that prioritize financial resilience 
While empathy enables workers to open up, it’s being supported with programs and benefits that keep them from leaving. More than 40% of workers in a recent survey said they left jobs seeking better benefits. 

Employers have taken note, particularly as workers during The Great Resignation fled jobs for better opportunities and benefits. Eighty-five percent said their benefits data is important in defining their benefits strategy. For employers, that means knowing their workers and the challenges they face — among them, finances. Six out of 10 workers say financial wellness benefits that promote savings are a top priority.

Read more: How to boost financial security and savings among low-income workers

Salary-linked benefits can offer employees access to emergency savings accounts or affordable credit that enables them to pay off existing high-cost debt. This allows them to save more money for unexpected expenses that may come up in the future. 

The pain workers feel from debt is real. It leads to anxiety, stress, and other mental health issues that not only impact them at home but also at work. Employers have an opportunity in front of them: take a page from the pandemic playbook and demonstrate greater empathy and put supporting programs in place that help workers effectively deal with debt and build financial resilience.