Team Management

How Employee Financial Stress Hurts Your Business—And What to Do About It

Yair Levin Financial Product PM Lead, Gusto 
Employee financial stress at small businesses
  • Almost three-quarters of Americans suffer from financial insecurity and stress – even people who earn over $100,000 a year.
  • At work, financial stress makes employees more likely to be distracted, cause accidents, miss work, and look for another job. 
  • You can help reduce your team’s financial stress by offering access to emergency funds before payday, encouraging them to set up automatic savings from their paychecks, offering financial counseling, and streamlining your reimbursement policy.

Simple time tracking that syncs with payroll.

Money worries are a major source of stress in America. Rent, mortgages, car payments, and childcare costs can make it feel impossible to stay afloat for many working Americans. At the same time, small business owners are worried about losing their employees and attracting capable team members. 

Could personal finance problems and lackluster retention be related? The answer, it turns out, is yes.

Most Americans feel stressed about money, no matter how much they make. Almost three-quarters of Americans surveyed by the American Psychological Association said they felt stressed about finances. Lack of emergency savings tops the list as the biggest source of employee stress.

Shockingly, financial insecurity impacts Americans who are seemingly well off. Nearly a quarter of households making between $100,000 and $150,000 a year said they wouldn’t be able to raise $2,000 in a month for an emergency. While surprising, this all starts to make sense given record national levels of student-loan and credit-card debt.

In other words, whether it’s an emergency car repair or a credit card bill that’s due before a paycheck lands, financial stressors are causing anxiety. And that anxiety doesn’t just shut off when someone walks into work.

Studies show that financial anxiety directly impacts on-the-job focus. One out of every three employees admits to being less productive at work because of financial stress. In fact, stressed-out employees can spend about 2 to 5 hours each week dealing with personal finances at work. That’s 2 to 5 hours not spent helping customers, generating revenue, or growing your business. Worse, stressed-out workers can cause workplace accidents, which creates more potential liability for you. 

According to recent studies, financially stressed employees are more distracted at work, more accident prone, more absent, and more likely to look for another job. The costs to employers is staggering: Nationwide, employers have lost $250 billion each year due to stress affecting work, with personal finances ranking as the top source of employee stress. 

Financial stress also harms employees’ physical wellbeing, increasing the likelihood of health-related absences. Stressed-out employees are more likely to experience fatigue, headaches, depression, or other ailments, leading to more sick days. 

Finally, financial stress can also increase attrition, as cash-strapped workers become more anxious to look for higher compensation elsewhere

Employers agree about the impact of financial stress, observing that a less anxious team “leads to less employee absence, and financial stability leads to longer employee tenure,” according to Zeeshawn, director of a small business and Gusto customer. 

So how can small business owners lower their team’s financial stress? Here are a few easy, cost-effective solutions to help protect your business from the impacts of employee financial anxiety. 

Give your employees flexible access to emergency funds

To reduce the stress of not having a rainy-day fund, tell your team about Gusto Cashout, a feature that allows them to access emergency funds before payday based on their estimated earned wages1. Cashout is included at no extra cost with all Gusto plans, and doesn’t create any extra work or recordkeeping for employers. More important, lifelines like Cashout are associated with a 28% reduction in employee attrition, according to a recent Harvard Kennedy School study

Encourage your team to set aside emergency savings – even a little bit helps

If your employees are paid by direct deposit, encourage them to start building a safety net by setting aside a small portion of their paycheck in a savings account, with the rest going into their checking account. Employees can do this by setting up direct deposit to multiple accounts in Gusto

Connect your team with financial counselors

Consider offering financial planning services as a benefit by partnering with a nonprofit like Neighborhood Trust Financial Partners (NTFP) to provide counseling about savings, debt-management, or 401(k) plans. This doesn’t have to break the bank – according to the NTFP website, their services can cost as little as $15 per employee per year.  

Streamline reimbursements

If your company has an expense policy, avoid asking employees to put large company expenses on their personal credit cards. Try to process reimbursements quickly, and consider using tools like Expensify and Zoho Expense to speed up reimbursements that can impact your team’s cash flow. 


1Employees pay a 1% fee on the amount they access. APR varies based on the term of the loan. For a loan amount of $400 over an 8-day term until the next payday, the APR would be 45.63%, and the repayment amount would be $404.

Updated: July 30, 2019

Yair Levin
Yair Levin Yair Levin leads the PM team for financial products at Gusto. With over a decade of experience building financial products, Yair is passionate about creating innovative solutions to make small businesses and employees more prosperous. He lives in Marin county, California, with his wife, Hannah, and their two kids Dalia and Asher.

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