Financial Wellness

Debt, Stress, and Mental Health in the Workplace

By Judith Mewhort on January, 30 2019
5 minute read

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Over the last several years, more and more studies have drawn the connection between employees’ financial stress and reduced productivity in the workplace. Employers know it’s happening but many are unsure of the causes. Even fewer have a plan to tackle the problem.  

While financial stress may be a result of various sources, from increasing costs of housing to saving for retirement, the number one cause is “Debt”.


How Does Debt Stress Affect Your Employees?

The presence of debt alone is not the source of financial stress, nor is the size of the debt. It’s the employees’ attitudes toward debt that determine the stress result.  For some, having a large mortgage is fine, as there is a systematic plan to pay it down, or it’s viewed as a necessity to purchase a home. On the other hand, having an outstanding balance of even a few hundred dollars in credit card debt can create anxious nights for many.

People that worry about how to pay bills suffer from a number of effects but two, in particular, create problems in the workplace. First, money problems can cause cognitive distress which makes it harder for employees to be attentive or to solve problems. The cause of much workplace absenteeism and presenteeism is worry about debt.

In addition, a study in the January 2016 edition of Psychology Science found that simply thinking about the prospect of financial insecurity was enough to increase physical pain. People reported feeling almost twice as much pain after recalling a financially unstable time in their life, compared to those who thought about a secure period.  Increased pain can lead to increased use of prescription medications and result in more time away from work.


5 Emotional Responses to Being in Debt

The reasons someone finds themselves in debt (and is worried about it) can vary but being in debt in general can cause unsettling emotional responses, some of which can have a negative impact on the workplace:

1. Denial

For some people, denial includes compulsive spending while ignoring their deteriorating condition. For others, debt creeps up on them—perhaps as the result of an unexpected emergency.  Regardless of how debt comes about, the responses are the same. They put off dealing with problems until some outside event – credit denied, repossession, legal action, harassing phone calls – forces a change.

Such behaviour just leads to more debt as interest charges and late fees pile up. But ignoring reality is a handy defense mechanism for the brain. It’s a way to rationalize mistakes and protect the ego. The problem is, reality always sets in.


2. Stress

stress-of-debt Whereas, denial is a protection mechanism for the brain, stress places an incredible toll on the body increasing cortisol levels and negatively impacting the immune system.

Recent debt-management statistics show us that more and more Canadians are struggling with the ill effects of borrowing.


3. Fear and Panic

This is stress on steroids. Receiving past due notices or calls from a collection agency can cause a panic attack, stress headaches, or an elevated heart rate.

This is where we start seeing how financial stress causes increased physical pain and physiological effects.


4. Anger

stress-over-debt Psychologists say that anger is often an outward manifestation of fear. People, especially men, are socialized that anger is an acceptable emotion while fear is not. So when someone is truly scared that they may lose their home, or their spouse, or their favourite possession because they couldn’t manage their money, they become enraged. They become mad at everyone around them including co-workers and their boss. Not only is this anger disruptive in the workplace, but it’s also seriously affecting their health


5. Depression

After denial, stress, fear, and anger, comes depression. People who struggle with debt are more than twice as likely to suffer from depression, according to a study by the University of Nottingham in England.

And depression leads to increased costs to employers in the form of higher health care claims, short and long-term disability claims, and employee turnover.


Dealing with Debt Stress: How Can an Employer Help

The good news about debt-induced mental health issues is that the treatment is straightforward. Employees just need to get out of debt. Easier said than done, of course. But it can be done if you help your team members form a plan and encourage them to stay with it.

To begin, create a culture where employees are encouraged to seek help. Recognize that financial stress is usually a temporary state requiring support, rather than a negative sign about an employee’s character. This step alone can be enough to make a significant difference.


The first steps on the ladder of success are to help employees:

  1. Understand how the debt happened
  2. Learn how to create a budget
  3. Track spending
  4. Change debt enabling habits
  5. Reduce the debt load
  6. Begin saving
  7. Recognize when professional help is needed

See also How to Deal with Financial Stress in the Workplace to learn how investing in an financial wellness program can help support your employees.

What about the ROI (return on investment) of a financial wellness program? The Institute for Social and Economic Research (ISER) at the University of Essex looked at the impact of financial well-being on mental health. They found that improving financial capability increases general health scores for both men and women by a far higher percentage, regardless of income level, than giving them an extra £1,000 in monthly income.

In fact, workplaces that focus on improving the financial health of their staff will receive benefits that far exceed the cost of putting the programs in place.

But how do you know if any of your employees are interested? According to the Canadian Payroll Association’s 2018 Employee Research Survey, 84% of employees indicate they would be interested in receiving financial education programs through the workplace.



Helping your employees reduce debt, improve financial literacy, save more money, and understand investing has tremendous benefits for your company. Doing so will help decrease health costs, reduce illness, and improve absenteeism and turnover. The result? Increased productivity, a healthier bottom line and a reputation as an employer of choice.  


Next Step

Wondering how you can reduce absenteeism and increase employee morale? Learn how to help your employees improve their financial wellness in this webinar. 

Employee Financial Wellness Webinar

Are money worries top of mind? Learn how to boost employee productivity by improving financial wellness with our 30-minute webinar.


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