Ways to support employees in an environment of rising interest rates

31 March 2023 Momentum Corporate

Rising interest rates have been the bane of everyday people for a while now and it looks like they are going to keep rising. This is a worldwide problem, so South Africa can simply add it to the list of economic woes cascading into household budgets.

The South African Reserve Bank’s Monetary Policy Committee has increased the prime lending rate by 50-basis points from 10.75% to 11.25%. This decision will likely impact all South African consumers in one way or another – the vast majority of which are an employee in somebody’s business.

According to Hugh Hacking, Head of Structured Investments and Annuities at Momentum Corporate, higher interest rates impact businesses because they impact their employees. “In organisations, higher interest rates mean higher borrowing costs, leading to decreased profits and cash flow. This can, in turn, lead to a decline in investment and expansion, which can have destructive implications for employment growth and morale,” Hacking says.

According to Momentum Corporate’s latest Partnership Connect Insight Report, it was found that over a third of employees’ energy levels are quite low and they feel quite negative about work. When looking at employee wellbeing, the report found that 15% of employees are struggling to cope at work. This rises to 22% when factoring in home stresses with over a third of employees struggling with their finances.

He says interest rate hikes affect employees in many ways. The 2022 Momentum UNISA Household Financial Wellness Index revealed that in 2021 households experienced rising consumer price inflation, interest rate hikes and high unemployment, which made achieving financial goals more difficult. Furthermore, the Momentum Unisa Consumer Vulnerability Index for Q4 2022 shows consumers are more financially vulnerable than in the previous quarter.

“We have to be concerned about the risk of burnout and acknowledge that economic fluctuations deeply impact employee wellbeing. When employees feel negative about their work, it negatively affects their productivity and ultimately the company’s culture,” says Hacking.

Hacking says it is a growing challenge to keep employee spirits high during turbulent economic times. Interest rate hikes and a myriad of other factors impact employee morale – with some being in more dire straits than others. If higher interest rates lead to economic uncertainty and/or retrenchments, he says employees may become anxious about their job security and future prospects. This can lead to decreased productivity and increased turnover – not an ideal position for growth and success in any industry.

While these are incredibly challenging times, Hacking says, there are ways employers can mitigate the potential adverse effects of interest rate hikes on employees. “Employers should prioritise transparent communication and regular updates about the company's financial performance and outlook. Employers should also consider diversifying employee benefits and compensation plans to mitigate the impact of rising interest rates on equity-based compensation,” he says.

“Employers can show they are invested in their employees' financial wellbeing by ensuring all employees have access to quality financial education. Employees belonging to Momentum Corporate's comprehensive retirement and group insurance solution, for instance, can attend educational webinars and access retirement benefit counsellors," Hacking says.

Alongside access to financial education tools, he says the encouragement of employees to speak to financial advisers is another good way to empower employees. A financial adviser will help facilitate financial and investment goals, find practical ways to avoid debt traps and set up a sound budget that is unique to the employee’s life. Hacking says this will ultimately create a more beneficial work culture and environment.

“While interest rate hikes can have negative implications for employees, proactive measures can help mitigate effects and ensure an engaged and productive workforce. Guiding employees on their journey to financial success is always good for business,” Hacking concludes.

Quick Polls


How confident are you that insurers treat policyholders fairly, according to the Treating Customers Fairly (TCF) principles?


Very confident, insurers prioritise fair treatment
Somewhat confident, but improvements are needed
Not confident, there are significant issues with fair treatment
fanews magazine
FAnews June 2024 Get the latest issue of FAnews

This month's headlines

Understanding prescription in claims for professional negligence
Climate change… the single biggest risk facing insurers
Insuring the unpredictable: 2024 global election risks
Financial advice crucial as clients’ Life policy premiums rise sharply
Guiding clients through the Two-Pot Retirement System
There is diversification, and true diversification – choose wisely
Decoding the shift in investment patterns
Subscribe now