Financial Wellness Is The Next Big Employee Benefit

Tackling financial stress impact on productivity with financial literacy programs

The world of employee benefits has undergone rapid change over the last few years. While increased workplace flexibility was already gaining traction before the pandemic, adoption accelerated after and continues to be a priority. A tight talent market means employers must do everything they can to attract talent.

Forbes Advisor found that 62% of employers changed their benefits in the last year. Employers now offer everything from mental health assistance, volunteer days, and daycare assistance to free food and drinks. This is in addition to offering higher salaries and pay rates.

However, the market is starting to shift. What has been a strong employee market is now slowly leveling out. It doesn’t mean employee perks and benefits aren’t important, but it does mean employers can think more critically about the perks employees value most.

 

The Need for Financial Education

Despite the strong labor market and steady increase in wages, employees are still feeling the pinch of high interest rates and the cost of everyday goods and services. More than half of employees said finances were a top cause of stress.

All of that stress has a significant impact on a company’s bottom line. Canada’s National Payroll Institute reported in 2022 that employee financial stress cost companies over $40 billion in lost productivity. And that was up considerably from $26.9 billion in 2021. A financially stressed worker spends nearly 30 minutes every day dealing with their financial situation instead of focusing on their job.

On top of that, studies show a glaring gap in U.S. adults’ financial knowledge. The share of people who said not being financially literate cost them more than $10,000 was up to 15% in 2022, from 11% in 2021. The financially literate are more likely to make ends meet, spend less than their income, and have three months’ worth of emergency funds.

This is where employers can help. By providing financial education as an employee benefit, companies can help employees manage their income and personal finances more effectively. This saves companies money and meets a critical need.

CloudPay’s study with Everest Group found that 57% of employees indicated that wellness programs, including those focused on financial well-being, have a positive direct impact on employee experience. Given not only the need for widespread financial education but also the desire of employees to learn more, employers should consider what they’re risking by not offering it.

Benefits of Financial Wellness

A more financially literate workforce benefits both employers and employees.

Employers that offer financial education typically have a more motivated, productive, and less stressed workforce. It can contribute to improved retention and productivity rates and lead to a reduction in the number of days employees take off for stress-related issues. Better financial knowledge can also lead to improved decision-making.

If you think about it though, the impact of financial wellness for employees has the potential to be life-changing. Bankrate found that 52% of Americans say money hurts their mental health. Among those who say money negatively impacts their health, 82% say it leads to stress, anxiety, worrisome thoughts, loss of sleep, and depression. Financial education has the power to reduce that stress and empower employees to make informed decisions about their finances.

Education also gives employees a better understanding of how much money they have, how they can spend it, how they can save it, and the hidden costs involved with things like home purchases, loans, or leases. It helps them take the mess of income, expenses, debt, and obligations and turn it into something manageable.

Financial Wellness and the Modern Pay Experience

Financial education and wellness align with another trend centered on the employee experience—the modernization of payroll and pay processes. How and when people are paid, how they access their financial information, and what control they have over their pay have changed significantly over the last couple of years and will continue to.

Just as many employees demand flexible work schedules and hours, they also want flexible pay options. Instead of waiting for a monthly or bi-monthly paycheck, people want immediate access to their earned wages when they need them. Companies can offer this through earned wage access. Earned wage access or on-demand pay allows employees to access a portion of their accrued income ahead of payday. This puts greater control and flexibility into the hands of people to manage their finances.

Employees also want autonomy, and companies can do that by streamlining payroll processes and updating technology. For example, employees shouldn’t have to wait for payroll or HR (human resources) teams to give them data related to their salaries, taxes, or other documentation. It should be available anytime at their fingertips—preferably through a mobile app.

Everyone is becoming more aware of how their information and data are stored and used. No one wants to wait around to access their personal documents when applying for a mortgage, for example. They want instant access and full control.

Make Your Benefits Mean More

Building a more holistic payment solution focused on enhancing the employee experience and improving financial literacy will help improve loyalty, engagement, and performance. In a highly competitive hiring market, employers that provide innovative, impactful solutions to support their people will emerge as the ones who not only retain their top employees but also become a destination for new hires.

Instead of continuing to over-inflate pay, help make finances work better for your people. Sure, perks and benefits are nice and might draw people in, but think more strategically. Give employees benefits that not only improve their work life but also their entire life.

Judith Lamb serves as the Chief Human Resources Officer at CloudPay.