Financial Strain Experienced by Workers

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With poverty estimated at 62.7% in 2023, slightly below its pandemic peak, and inequality ranking among the highest globally, escalating costs for essentials such as housing, transportation, food, and electricity are placing significant financial pressure on employees.

This Workers Day it is crucial that we take a closer look at the financial strain experienced by workers amid economic challenges exacerbated by ongoing electricity shortages and a sluggish economic growth rate. This is according to Rynhardt de Lange, Director and Head of Legal at Milaw Legal, who said there is an urgent need for businesses to support their employees during these challenging times.

“With electricity supply shortages leading to cumulative outages equivalent to 289 days in 2023 and an overall poverty rate of 62.7% according to the World Bank, the financial stress on South African employees is a critical issue that not only hampers productivity in the workplace, but also impacts employee overall health and wellness in a significant way,” said de Lange.

Key factors that contribute to a financially strained workforce.

Electricity Supply Shortages: South Africa experienced up to 289 days of power outages in 2023 due to load shedding, disrupting economic activity, and increasing operational costs for businesses. This has a direct impact on the financial stress experienced by employees who struggle with increased personal expenses.

Weak Economic Growth: The nation’s GDP growth fell to a mere 0.6% in 2023, with load shedding and transport bottlenecks severely hindering economic sectors, particularly mining and manufacturing.

This translated directly into employee financial stress as the latest Floatpays State of Employee Wellbeing Barometer highlights that 20% of South Africans suffer from high financial stress, adversely affecting their mental health and job performance.

The direct link between financial wellness and an employee’s effectiveness at work cannot be overstated. Companies should seek to implement programs that alleviate current financial stress and equip our employees with the tools they need for future financial resilience.

Tips to employees experiencing financial strain:

Budgeting and Expense Tracking: Start by creating a detailed budget that outlines your income and necessary expenses. Then, track your spending to identify areas where you can cut back and save more effectively.

Emergency Savings: Build an emergency fund to cover unexpected expenses or income disruptions. Even if it’s a small amount, aim to save a portion of your salary to grow your safety net gradually.

Prioritise Essential Expenses: Focus on covering essential needs such as housing, utilities, food, and transportation first. Consider cutting back on non-essential expenses like dining out, entertainment, or luxury items to free up resources for necessities.

Seek Additional Income Sources: Explore part-time work or freelancing opportunities that align with your skills or hobbies to supplement your income. Generating extra cash can provide financial relief during tough times.

Explore Professional Financial Assistance: Research available government or community programs offering financial assistance. Additionally, seek support from organisations that provide aid for specific needs like food or utility bills.

The importance of employee financial wellness in the broader context of employee well-being and by enhancing financial literacy and providing targeted financial support, companies not only help employees manage their current financial challenges but also equip them with the skills necessary for future financial stability.

A comprehensive approach encompassing personalized financial education, access to financial advisors, and discount programs for essential services is essential for maintaining a productive workforce and fostering a positive workplace environment.