Deepening debt sparks concern for employee wellbeing as cost-of-living bites

A study by Aviva found that financial distress among employees was widespread even before the economic uncertainty that has heightened during the Autumn. 

Among lower income employees – those earning less than £30,000 – nearly a third (30%) report that their current level of debt is detrimental to their wellbeing. Across all salary brackets, the number of employees who feel this way has risen sharply year-on-year, from 26% in 2021 to 34% in 2022, among companies with more than 1,000 employees. 

The findings also highlight a gender divide in the experience of financial wellbeing. Across all age and income groups, less than half (49%) of women would describe their financial wellbeing as good, compared to 67% of men.  

Women are also more likely to be concerned about their finances in light of the increases to the cost of living, than men (81% to 76%). 

The report shows that financial wellbeing has significantly decreased among workers with household incomes under £36k.  

Three quarters (75%) of all employees that have experienced a reduction in their income, report experiencing additional stress as a result. 

One in three (34%) feel they are no longer prepared for unforeseen life circumstances including accidents, serious illness, or redundancy that could affect them or their families.  

The study also explores how employers can strike the balance of providing a greater duty of care to employees against an increasingly difficult backdrop, while also taking steps to future-proof their business. 

50% of all employees say their financial situation is negatively impacting their mental health, with those earning up to £24,000 per year the most likely (60%) to feel their finances are negatively impacting their mental health. 

Across all income groups, two in three (66%) employees feel that managing their finances has become more difficult recently, as economic pressures have gradually begun to impact households. 

Dr Doug Wright, medical director at Aviva UK Health, comments: “The relationship between debt and mental health is long established, but in these challenging times, employers need to be closely attuned to their employees’ financial wellbeing, signposting help for those who need it but are unsure of where to find it. 

“Workplace education campaigns about personal finances, including credit ratings and budgeting, can be a great way of helping people feel more secure with their monthly pay cheques.”