No one can focus on work if they are stressed about unpaid  bills.  Picture:  ISTOCK
No one can focus on work if they are stressed about unpaid bills. Picture: ISTOCK

South African employers are wasting a staggering 35% of their payroll bill due to staff productivity being impaired by medical and financial problems, Alexander Forbes estimates.

Alexander Forbes is one of several employee benefits companies that are persuading employers to take a greater interest in their staff's personal finances, as doing so is likely to have a significant impact on their bottom line.

While many employers have already introduced workplace wellness programmes that focus on health to minimise absenteeism, company executives are now beginning to see the value of helping employees to manage their finances.

Momentum has estimated the cost of lost productivity as a result of absenteeism in South Africa to be R70-billion, or 2% of GDP. It also estimates that the cost of lost productivity as a result of "presenteeism" - the hours when you are present at work but not focused on your job as a result of financial or other stress - to be four times as much.

Global human resources consultancy Mercer, which is also a major shareholder in Alexander Forbes, estimates that globally employees spend 13 working hours a month dealing with personal financial issues, while the 2017 PwC Financial Wellness Survey in the US estimates that 53% of employees are financially stressed and half of those employees spend 138 work hours a year or more dealing with their financial problems.

Earlier this year Greg Ward, a financial adviser whose company provides financial wellness services to employers of some 2.4million people, told a Society of Actuaries conference in Boston that in the US a 10% increase in the financial-wellness score of employees resulted in a 60% decrease in the cost of healthcare cover, a 10% reduction in absenteeism, a 10% improvement in turnover, and a 2% decrease in the cost of garnishee orders.

According to Momentum and Unisa's latest Consumer Financial Vulnerability Index, South African consumers are under pressure from falling income, rising expenditure, poor savings habits and high debt servicing costs.

Alexander Forbes Health reported last month that financial stress and its impact on mental health had led to absenteeism, poor work performance and reduced ability to concentrate among South Africans.

It said 35% of all temporary incapacity leave applications that employers received were due to mental and behavioural issues.

While employers have good reason to worry about their employees' health and finances, companies are slow to sign up for assistance programmes. Elaine Wright, head of business financial wellness and client experience at Momentum Corporate, says at Momentum the take-up is 42%.

Concentrate and thrive

Employees can receive free financial guidance, which could help them focus better at work. This could in turn yield benefits like performance-related bonuses, career advancement and improved earning capacity.

Typically, financial wellness programmes run by employee benefits companies are designed to benefit employee, employer and the service provider.

The programmes assess an employee's retirement planning, medical cover and death and disability insurance. Severe illness cover is increasingly included in these programmes.

Alexander Forbes says it has taken financial wellness programmes further with services and solutions provided by teams with a range of skills to help staff manage debt, prepare financially for emergencies, secure a home and even improve earning capacity.

To encourage employers to spend money on such programmes, employee benefits companies typically measure and report on improvements in the overall financial wellness of employees.

Momentum now publishes the Effective Employee Index and can produce an index score for individual companies, while Sanlam Employee Benefits has a "financial wellness benchmark" to measure if the programmes are working.

Momentum says its interventions can reduce unproductive employee time by a third.

Alexander Forbes's new initiative attempts to quantify not only the cost of absenteeism but also the cost of presenteeism.

John Anderson, the head of group client solutions, says Alexander Forbes is using quantitative data together with information from a "financial courage index" developed in conjunction with Mercer to measure self-reported presenteeism.

Assessing the debt picture

Alexander Forbes will compile credit report information about employees - including average debt-to-income ratios, overdue balances on instalments and the number of loan accounts and civil judgments - to give employers an overall view of how their staff are coping with debt.

Anderson says Alexander Forbes estimates that 55% of retirement fund members may have too much debt, making it hard for them to preserve their savings when changing jobs and driving up lost productive hours and medical scheme costs.

Momentum's preliminary research into presenteeism shows that around 28% of employees are distracted from work for up to 35 days a year. Its productivity research shows that 4.6% of employees have garnishee orders on their salaries - up to 30% of which are invalid.

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