Financial stress: why and how it affects workplace safety

If 2026 looks set to be a year of anything, it’s one of workers’ rights. With the Employment Rights Bill having been granted Royal Assent in December 2025, millions of workers now stand to benefit from improved protections and safer workplaces. OSH practitioners and decision-makers have historically excelled at identifying health and safety issues. However, technical and physical competencies address only a fraction of what creates an inherently safe workplace.

Mental health issues are increasingly being recognised as a vital part of workplace health and safety, but they are a lot harder to detect, address and rectify. As we enter a new year, it’s prudent to dedicate some attention to this evolving topic. Cognitive impairments caused by psychological and even financial stress, however seemingly minor, cannot be overlooked.

A wealth of external stressors exist which can affect employee mental health, and most UK workplace health and safety legislation focuses on physical risks, which illustrates the need for review and discussion. That said, our growing awareness of mental health and wellbeing is turning the conversation in a different direction, emphasising that more needs to be done to protect and support employees.

Employees worried about debt, or living payslip-to-payslip, cannot be expected to have unimpaired cognitive freedom every day of the working week. Photograph: iStock

Bring financial stressors into the limelight

Looking at workplace health and safety incident reports through a wider lens, patterns emerge which can’t be explained by standard ‘cause-outcome’ risk assessments. Forklift operators misjudging clearances, lab technicians overlooking important verification steps, construction workers who suffer a fall, among others, represent incidents that can often be traced back to what behavioural economists call ‘cognitive scarcity’.

This term refers to a psychological state of mind where the brain is so consumed by thoughts and feelings about the individual’s lack of resources – commonly money – that it has a severely limited mental capacity for other tasks. Psychological experts have theorised that the brain develops two key mechanisms when it’s in this state of mind; tunnelling (where the brain narrowly and intensely focuses onto an immediate ‘shortage’), and cognitive load (which saps the brainpower needed for other mental tasks). 

Many studies have confirmed that money worries can impede an individual’s cognitive control, but it remains mostly unclear how this effect occurs physiologically. According to clinical experts at counselling and therapy provider KlearMinds, stress manifests in three key ways: a) physical, b) emotional and c) behavioural symptoms. However, this is not something to brush under the proverbial rug. Financial stress can cause workers from all walks of life to exhibit specific traits that fall under these definitions, but emotional symptoms are the trickiest to spot from the outside looking in, and often underpin other symptoms. 

The depletion of anybody’s mental bandwidth can manifest in behavioural and physical changes, such as reduced working memory, impaired attention, slower reaction times and poor impulse control or decision-making, which represent the very cognitive functions that are essential for preventing workplace accidents.

Therefore, employees worried about financial issues such as debt, arrears, living payslip-to-payslip, rising cost of living, unexpected expenses, lack of savings, economic instability and major life transitions cannot be expected to have unimpaired cognitive freedom every day of the working week. When they’re experiencing these stressors, their brains are likely more occupied with these problems than not, leaving their abilities to recognise hazards, follow procedures and maintain situational awareness somewhat depleted. 

Mental health conditions, according to HSE’s annual workplace health and safety statistics, remain the primary driver of work-related ill health. 964,000 workers reported stress, anxiety or depression caused or made worse by work in 2024/25, in line with the ascending trend that has been reported year-on-year.

An organisation’s incumbent safety systems and policies rely on human oversight and involvement, but they’re only effective if each worker’s cognitive foundations are solid and not eroded completely by financial stress.

Voluntary self-reporting about any financial concerns can help identify individuals at risk. Photograph: iStock

How is cognitive distraction a hazard?

The Health and Safety at Work Act 19745 requires employers to ensure worker health, safety and welfare “so far as is reasonably practicable”. While most of this legislation implicitly focuses on physical hazards, mental health should also be considered, but many HSEQ managers remain uncertain how to operationalise this principle.

OSH practitioners need to appreciate that financial or mental stress produces observable, physical effects, including behavioural changes, which can elevate the probability of a safety incident at work. These include (but are not limited to):

• Persistent fatigue due to difficulty sleeping, which affects concentration, decision-making and reaction times
• Frequent headaches or migraines which can disrupt operational capacity
• Muscular tension, which impairs motor control
• Heightened irritability, anxiety and a sense of overwhelm, which can reduce hazard perception effectiveness and constrain cognitive resources
• Increased absenteeism, which can signal deteriorating abilities to cope
• Noticeable changes in work quality – such as missed actions or steps, inconsistent results and uncharacteristic errors
• Partial or complete social withdrawal, which creates communication barriers and thus increases the likelihood or severity of safety incidents.

These symptoms aren’t often isolated; they compound, particularly among workers experiencing financial worries. Whether it’s down to variable income, high amounts of debt, or sudden unexpected changes in circumstances, they’re often genuine and have real-world implications if left unaddressed. If these problems persist for a long time, it can result in safety risks – not just for the person under stress, but the wider team as well. All it takes is a lapse in concentration or a poor decision to create a tangled web of issues.

Aligning financial wellbeing and safety management 

Once HSEQ managers have gained an understanding of the causes, symptoms and possible negative workplace safety impacts of the ‘scarcity mindset’, they should ask a question about alignment. Namely, if it’s possible to balance mental and financial wellbeing within an existing workplace safety framework, how can the employer explore this?

Several approaches show promise:

• Workplace safety risk assessments should consider workforce vulnerabilities that could impact cognitive reliability. 
  
  
• Voluntary self-reporting of problems relating to financial worries and the resulting impact on mental health and work performance through anonymous workplace surveys can help identify individuals and groups of employees at risk, making it easier for employers to offer confidential support to affected individuals.
  
  
• Where possible, engineering controls could include automated alerts and mechanisms that ensure all relevant safety steps are conducted, reducing reliance on human memory.
  
  
• Proactive administrative intervention from management can alleviate operational and project-based stress affecting workers. Adjusting shift patterns and allocating fewer tasks can alleviate mental pressures on those experiencing stress, whether financial or otherwise.
  
  
• General financial literacy and stress management training (funded by the employer) can reduce the symptoms of stress and mental distraction arising from personal financial worries by providing employees with suitable general financial and stress-related advice and coping mechanisms for feelings of distress. However, because the financial challenges, circumstances and worries of individuals will often differ, general financial or stress management training may be of too broad a nature to address and offer solutions to the specific financial issues faced by all individuals. As a result, employers may need to consider bespoke financial training, support and advice for individuals experiencing financial challenges and the associated mental impact. 
  
  
• Training programmes for frontline supervisors that enable them to notice behavioural, physical or emotional changes among team members (and empower them to provide support and direct staff to sources of help), can be a valuable way of spotting employees who may require support with financial problems and general personal stress and the associated distraction and performance issues arising from them. Management can be equipped to recognise stress indicators, direct workers to relevant resources and temporarily intervene and provide support when appropriate.
  
  
• Effective management of both work-related stress and general workplace safety risks requires consistent measurement. Stress indicators (such as sickness absence frequency and the cited reasons) and safety metrics (such as reported incidents, near misses and audit findings) can be used to identify patterns which need intervention and addressing.
  
  
• Creating a ‘psychologically safe’ environment, where staff feel comfortable revealing and reporting problems like personal stress without fear of judgment or undesired consequences (such as threats to employment status), is a fundamental step in removing any existing biases and stigmas around mental health. For instance, employers should consider creating a confidential ‘not fit for task’ reporting system, so workers can confidently and safely declare they temporarily feel unable to work due to stress factors like financial worries, without fear of reprisal.
  
  
• Providing access to employee assistance programmes that offer traditional or financial-focused counselling, therapy and confidential discussions, assures the workforce will be able to obtain confidential support if they feel they are struggling with problems like financial worries and general poor mental wellbeing. Financial wellbeing initiatives for the workforce work best when HR, HSEQ and occupational health functions align and collaborate, resulting in a more comprehensive and results-based approach, rather than one driven by siloed, independent initiatives. 
  
  
• Organisations lacking the internal capacity and resources to provide both general mental health support and support for those with financial worries can engage specialists in these areas, as proven, professional intervention can not only reduce stress but build psychological resilience among workers. 

The Equality Act 2010 recognises poor mental health as potentially constituting a disability if it substantially affects the individual’s daily activities, according to mental health charity Mind’s general guide on disability discrimination. In accordance with the Act, employers must make reasonable adjustments to make sure workers with disabilities, or physical or mental health conditions, are not substantially disadvantaged when doing their jobs. For those with mental health conditions, this might include day-to-day measures such as reallocating tasks, extending work-from-home privileges, and lessening administrative workloads. 

Companies offering financial counselling services often report reduced absenteeism. Illustration: iStock

Fundamentally, however, employers have a general duty of care to assess and address all known and potential risks to worker health and safety, including how financial worries can affect an individual’s psychological state of mind, and in turn potentially translate to a higher risk of adverse safety incidents at work. However, with evidence connecting financial stress to cognitive impairment, it makes sense for employers to address this and try to support the affected employees, for the betterment of individuals and the wider team. 

Companies offering financial counselling services often report reduced absenteeism among participating employees. Verve Healthcare recently reported that workplace absenteeism due to financial distress cost UK employers £3.7 billion in 2023 (approximately 50 per cent higher than £2.5 billion in 2021). Organisations that train supervisors to recognise, respond to and manage stress can expect to see a reduction in absence across their teams, as workers will have increased confidence about disclosing issues without fear of stigma, allowing early intervention before the worker takes sick leave for poor mental wellbeing.

Integrating effective approaches to addressing and supporting mental health and financial wellbeing into occupational safety is a fundamental step in the right direction.

Employers who understand how cognitive impairments caused by financial and psychological stress can lead to behavioural and physical changes that potentially increase the risk of safety errors at work will be in a strong position to support their staff and reduce the risk of accidents connected to factors such as impaired attention, slower reaction times, and poor decision-making.

Providing financial education and support to the workforce benefits both employees and the business. Workers deserve employment conditions and support mechanisms that safeguard their psychological health as well as their physical safety, and employers understandably want to reduce the number of incidents, keep operations moving and improve productivity as the business grows. The more effectively and carefully that both aims can be balanced, the better it will be for all parties. 

Note: This article explores the evolving link between financial stress, cognitive function and occupational safety. For specific guidance on implementing mental health policies or managing financial wellbeing within your organisation, please consult with qualified HSEQ and financial practitioners, legal counsel and occupational health specialists.

Chloe Miller is a business graduate and freelance writer, specialising in industry insight and the latest best practice in marketing, business and HR. Contact her at:
chloe-miller.co.uk 
E. [email protected]