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The concept of financial stress and how to measure it has been of interest to academics since the 1980s. While early studies of financial stress focused on easily determined objective measures such as income, assets, and liabilities, researchers soon realized that people with the same objective level of income could experience different levels of stress, based on the individual perception of one’s current financial situation relative to present needs and future goals. In 2003, Kim and Garman defined financial stress as the subjective assessment of one’s financial condition, including one’s perceived ability to meet expenses, satisfaction with financial condition and one’s level of savings and investment, and worry about debt.

In this second half, let’s examine just how much money implementing a financial wellness program could save an existing company. Let’s take a hypothetical example, based on existing data from the previously cited studies.

Imagine a technology company with 1,000 employees. Eight hundred employees are salaried, with an average compensation of $84,000 annually, and 200 are hourly employees at an average wage of $23.50/hour. Turnover for this industry is just over 3% annually in 2017, according to the most recent report from the Bureau of Labor and Statistics. Total compensation for all employees across the company is $76,600,000. We’ll assume everyone works an average of 2000 hours annually, and that hourly employees separate from the company at twice the rate of more highly compensated salaried employees. The math is shown below.

Absenteeism cost:

$188/day x 3.5 days x 200 hourly employees= $131,600

Plus $336/day x 3.5 days x 800 salaried employees = $940,800

Total absenteeism cost = $1,072,400.


Presenteeism cost:

$23.50/hr x 13 hrs/month x 12 months x 200 hourly employees = $733,200

Plus $42/hr x 13hrs/month x 12 months x 800 salaried employees = $5,241,600

Total presenteeism cost= $5,974,800.


Turnover cost:

Hourly employees: $9,400 (20% of annual $47,000 salary) x 2% of workforce = $37,600

Salaried employees: $168,000 (200% of annual $84,000 salary) x 1% of workforce =


Total turnover cost = $1,381,600.


Grand total = $8,428,800. This is a conservative estimate; remember Garman placed the combined costs of financial stress at 15% to 20% of total compensation, which in this case would equal $11,490,000 to $15,320,000. And this example doesn’t include indirect healthcare costs. Readers may use these same formulas to estimate the cost of employee financial stress at your own company.

While these numbers are only an estimate, and costs will of course vary depending on the individual business, they do give a sense of the magnitude of the hidden cost of financial stress and what it may be costing a company’s bottom line. Reducing these numbers by even 5% to 10% can result in substantial cost-saving or cost-avoidance for business. It’s hardly surprising, then that so many companies are seeking to implement financial wellness solutions in an effort to reduce this drain on business productivity and profitability. Doing the right thing by employees can also make good business sense.

In my next post, we’ll look at criteria HR and benefits managers can use to choose the best financial wellness solution. To find out more about how companies can avoid these costs, click here.

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