Financial stress on the rise, urgent measures needed for working Canadians

Employees are worried about their finances while at work, resulting in an estimated $45 billion loss in productivity for employers

Financial stress on the rise, urgent measures needed for working Canadians

Recent research has revealed that a “financial stress storm” has intensified, necessitating immediate action to protect the financial wellbeing of working Canadians. 

According to data from an analysis of the National Payroll Institute's Annual Survey of Working Canadians, done by Canada's Financial Wellness Lab (the Lab), there has been a 20% increase in the number of working Canadians facing financial stress over the past year, bringing the total to 37%.  

This trend began in 2021, after a brief respite in 2020, when pandemic-induced lockdowns led to savings, which now appears to have been the calm before the storm. 

“The frightening reality of this storm is that the contributing factors to financial stress are becoming more challenging than ever for Canadians to overcome,” said Peter Tzanetakis, president of the National Payroll Institute. "The cluster analysis done by the Lab using our survey results dating back to 2014 has consistently found that reducing debt, saving more, and spending less are the primary factors determining if individuals are financially comfortable, coping, or stressed.” 

“With interest rates, inflation, and the cost of living all continuing to rise, for many working Canadians navigating these factors have negatively impacted their financial wellness,” Tzanetakis continued. “They need to take immediate and urgent action to keep from being overcome.” 

For financially stressed Canadians, saving has become more challenging. Sixty-three percent spend all of their net pay, while 30% spend more than their net pay, often resorting to debt or dipping into savings with each pay cycle. 

As a result, 66% of those in financial stress are living paycheck to paycheck, with 50% struggling with debt. In contrast, only 2% of financially comfortable individuals and 9% of those coping financially live paycheck to paycheck. 

The financial stress storm and the workplace  

Forty percent of respondents in the financially stressed group reported that their financial stress negatively affected job performance. On average, Canadian workers spent 33 minutes daily thinking about their finances while at work, resulting in an estimated $45 billion loss in productivity for employers. 

One in five respondents admitted to taking sick days to cope with financial stress, and one in ten even left their jobs as a consequence. 

“Hoping that [the storm] will somehow pass or ignoring how it is affecting you – or, for employers, your business' bottom line – is not a solution and could even make the situation worse. On the contrary, immediate action is needed, including making some difficult choices with regard to financial habits, to weather what is still ahead,” Tzanetakis said. 

Emergency measures 

While earning more income may seem like the solution, the research shows that it does not significantly impact the financial wellness of Canadians. Reducing reliance on debt and consolidating existing debts to manage them more efficiently is key. “Using more and more debt compounds the problem,” said Chuck Grace, managing director of the Lab. 

Additionally, making difficult choices about spending and prioritizing essentials can help individuals navigate their financial challenges. Seeking qualified financial advice is recommended for those looking to improve their situation. 

Support from employers needed  

Employers can play a crucial role in alleviating financial stress among their workforce. Employers may encourage employees to save a portion of their pay automatically and invest in payroll professionalism to prevent payroll delays, which can be a challenge for many facing financial stress. 

By combining efforts to improve personal financial habits with support from employers, Canadians can weather the financial storm and shorten its duration, despite the challenges that lie ahead.