The State of Employee Financial Wellness 2023

Improve employee retention and experience by increasing financial wellness

In the U.S., employees often struggle to make ends meet. In fact, nearly two-thirds of Americans are living paycheck to paycheck. ¹

The recent spikes in inflation since 2020 have made employees’ financial struggles worse. It seems everything has gone up in price: housing costs, groceries, gas, general goods and more. Meanwhile, wages have not kept up with inflation in most industries, so that real wages have declined in 80% of the private workforce. ²

To better understand the current landscape of employee financial wellness, The HR Research Institute conducted an exclusive study of HR professionals entitled The State of Employee Financial Wellness 2023. The report covers the prevalence of financial wellness programs, the top sources of financial stress, the metrics that organizations track to measure the success of their initiatives, and much more.

Key Findings

• Organizations have a long way to go when it comes to understanding and supporting their employees’ financial needs.
• Fewer than half of organizations currently have an employee financial wellness program/initiative or are thinking about implementing one.
• Most believe educating employees on financial issues potentially plays a key role in their wellness.
• Organizations most commonly track a variety of metrics to measure the success of their financial wellness initiatives.
• Companies that successfully help their employees attain financial wellness to a high degree tend to do things differently from those that do not.

Understanding Employees Financial Well-being

Only one-tenth of HR professionals surveyed say they understand the financial well-being of employees in their organization to a great extent, based on solid investigations and metrics. Forty-four percent, however, say they somewhat understand employee financial wellness, basing their opinions on “sporadic data.”
We asked respondents to identify their employees' top five sources of financial stress. Inflation issues are at the top of the list, with 62% citing this source, the only response selected by more than half of respondents. The increases in interest rates, which especially impact costs of purchasing new housing, are also a common concern, cited by 42% of respondents. It’s no surprise then that the third most common source of financial stress is not earning enough money to pay bills and pay off debt (40%).

The Prevalence of Financial Wellness Programs

About one-quarter of organizations have a program/initiative to improve employee financial wellness, and about one-fifth are either currently in the process of implementing one or are in the planning stages. More than half currently do not have a program that is implemented or in the works. This could explain why so few organizations successfully help employees with their financial well-being. However, of these, 23% say it’s something they would consider over the next 12 months and 12% say they would consider it in the next 5 years. 

We asked respondents why they decided to implement financial wellness programs. Among those organizations that have embraced—or plan to implement—such programs, five key reasons stand out:
 

• to improve employee mental health
• to become an employer of choice
• to improve retention
• to help employees make decisions free of financial stressors
• to engage existing employees

 
We asked respondents who said their organization does not have financial wellness initiatives why this is the case. Of the organizations that do not currently offer financial wellness initiatives, about half (45%) say it is because they have more important priorities.

Measuring the Success of Financial Wellness Programs

Cost is a major factor for organizations deciding to implement a financial wellness program, so how do organizations ensure they are getting a good return on investment once implemented?

The most common metrics that organizations track and measure are:
 

• Employee attitudes at work (job satisfaction, morale, happiness)
• Enrollment and contributions to retirement plans, Health Savings Account (HSAs), etc.
• Reduction in employee turnover
• Employees’ satisfaction with the financial wellness program
• Worker engagement

The Current Benefits Landscape

A large majority of respondents say their organizations offer medical/dental insurance (87%) and life insurance (80%) as part of their benefits programs. Two-thirds also offer employee assistance programs (67%) and over half offer disability income insurance (59%).

While 70% offer employer retirement plan contributions, fewer offer other financial-related benefits, such as HSAs/Health Reimbursement Arrangements (HRAs) contributions (50%), education spending reimbursement programs (42%), pension plans (27%) or stock options/equity (20%).

And, although respondents say childcare expenses is one of the top five sources of financial stress, just 9% of organizations offer childcare or dependent care vouchers or support.

Notes  

---