The research provided exclusively to HR magazine by Cass Business School and commissioned by income protection providers, Unum, found the UK workforce has changed dramatically. It has become older, more feminised and includes more disabled workers, the research showed.
However, it found employee benefits - designed to provide financial protection - have failed to adapt, leaving workers financially exposed.
Significant gaps have opened up between employer-provided benefits and the protection required by the modern workforce. As a result, today's employees are less financially secure than they were 30 years ago.
The report revealed the reduced financial protection is due to falling wages, the decline in generous occupational pensions, reduction in statutory labour market protection and the continued reform of state welfare benefits.
Compared to 30 years ago, there are 46% more older workers and 11% more workers who are ill or disabled. However, employee benefits provision, including pensions and income protection, haven't kept pace with change.
The research found workers in financial difficulty are less productive and said it's in an employer's best interests to better protect their staff.
The research identifies three groups within the UK as being more "at risk" due to the likelihood of periods of unemployment. These include: people with disabilities or long-term illness, older workers and employees with caring responsibilities.
These "at risk" catergories are more disproportionately impacted by the employee benefits gap, the research stated.
HR director at Unum, Linda Smith, told HR magazine, the report highlights "quite clearly" that employee benefits are "lagging behind" the evolving workforce.
"Employers must ensure they properly communicate with their staff," she said.
"Today we have a very diverse workforce and one where those diverse needs change on a more frequent basis than those in the past.
"This means employers must anticipate the changing needs of their staff if they are going to fully support them," Smith said.
"An older worker has potentially different needs but they're also looking for financial security so an employer must modernise the benefits package to support older workers."
She added: "I would like to see more of an understanding of employee benefits in HR departments when they're putting their proposals to the financial director.
"HR must be educated about how best to provide benefits and not just look at it from a cost perspective."
The report also found by 2020, a third of the UK's workforce will be over 50. Yet the report found that workers are increasingly under-prepared for old age and ill-prepared to support themselves in retirement.
Professor Nick Bacon, Cass Business School, part of City University London, said: "Financial insecurity has been compounded by an increased cost of living and higher levels of unemployment, meaning that employees are more likely to fall into financial difficulty than they were 30 years ago.
"During the same period, employee benefits have declined, leaving a gaping hole in the financial protection of today's employees.
"Financial insecurity has a negative impact on employee health and wellbeing, and also productivity. Employers that provide benefits designed to support the financial security of their staff, such as access to vocational rehabilitation, typically see a more productive workforce."
Peter O'Donnell, CEO of Unum UK, said: "More than ever, people are looking to their employers to provide the financial protection they need. A better-protected workforce is good for the employer, as well as the employee."
