Employees who got into financial shortfall between pay periods also suffered from mental distress and other health problems during Covid-19.
After Covid-19 hit the Indian economy, nearly 81 per cent of Indian employees faced a financial shortfall between pay periods leading to mental distress, health problems and lower morale, impacting their workplace presence, resulting in lack of motivation, focus, decreased productivity and higher absenteeism, finds a research report by Refyne, an Indian Earned Wage Access platform in partnership with Ernst & Young.
The researchers interviewed 3,000 respondents aged between 20 and 60 in July- August 2021.
India has been one of the worst hit in terms of unemployment and pay cuts during Covid-19 in 2020. While the global unemployment rate stood at 6.5 per cent, it rose to 23.52 per cent in India in April 2020, leading more people into extreme financial crisis and other sorts of financial mismanagement.
The study reveals that people at both high-income and low-income levels suffered financial crisis due to Covid-19. Nearly 60 per cent of the respondents whose monthly salary was more than Rs 1 lakh per month failed to meet their expenses with their salary during the pandemic. With Covid-19 leading to factors like inflation, job cuts, meagre salary, more than 70 per cent of the respondents found it difficult to meet all their expenses with their monthly salary.
One of the major reasons for the failure to meet the need was the rise of unexpected expenses, which include loan repayment, medical expenses (often being Covid-19 affected) and home and family-related expenses. Thus, more than 80 per cent of the respondents felt the need to have more money in hand during the Covid-19 outbreak.
The low-income group, whose monthly income was less that Rs 15,000 suffered the most due to such unplanned expenses as they did not have adequate savings to cope up and push them into further financial crisis. So, nearly 33 per cent of this income group often got into a debt trap.
Even if there was no medical or other emergency, factors like ever-increasing cost of living, fear of missing out lifestyle spending, poor financial planning and vicious debt cycles led more than 80 per cent of the respondents to exhaust their salary before month-end, whereas 34 per cent ran out of their pay before mid-month. Thus,more than 40 per cent of the Indian employees across various income groups fell back on loans from friends and family to meet such unexpected expenses.
The research shows that in many cases, financial stress was there, irrespective of having good savings, good earnings and even without any unexpected expenses. Also, 70 per cent of the respondents who did not encounter any unexpected expenses over the last six months reported experiencing financial stress.
“The need for a better quality of life, evolving mindset and impact of the Covid-19 pandemic is creating a fundamental shift in the way employees think about and manage their finances. Employers have a critical role to encourage responsible and disciplined financial behaviour among employees,” says Chitresh Sharma, CEO and co-founder, Refyne.