Why Employee Financial Well-Being Is Increasingly Important For Organizations

Steps employers can take

The pandemic has disrupted nearly every aspect of our lives, including the financial health of many businesses and their people. Nonetheless, research has shown that many employees were already experiencing significant financial stress even before Covid-19.

According to Bank of America’s 2020 Workplace Benefits Report, only forty-nine per cent of employees described themselves as “financially well,” down from sixty-one per cent in 2018, while fifty-nine per cent admitted to not having control over their debt. That’s a twenty per cent decline in financial wellness confidence in just two years! The study also revealed that 63% of Americans live pay check-to-pay check, and 40% surveyed said they would not be able to cover a $400 emergency expense. 

We all know what it’s like when an unwelcome vehicle repair comes up or a home appliance like the refrigerator breaks down. It’s stressful and annoying, but for many people, these types of unexpected expenses can be insurmountable without resorting to adding the expense to a credit card or reaching out to family members or friends for a loan. 

As a leading cause of employee stress, an increasing number of organizations are realizing the importance of supporting the financial well-being of their workforce. One critical factor employers must remember as they plan a strategy around financial wellness is that we now have a historic five generations in the workplace. Therefore, it is not just about creating a one size fits all program. It is about designing and delivering more personalized assistance covering everything from paying off debt to having an emergency fund to cover unexpected expenses to retirement planning. This means taking into consideration that everyone’s needs differ, depending on their location, role personal lives and outlooks.

An effectively designed employee financial wellness program can have mutual benefits for both the employee and employer, reducing barriers to motivation and productivity as well as organizational and personal wellness.

Employers have long understood that a happy employee is a productive employee. Many organizations have come a long way in offering generous benefits packages and perks to attract and retain employees, including unlimited vacation time, employer-subsidized gym memberships, employee rewards and appreciation programs, and free snacks and beverages, to name just a few. Additionally, employee retirement programs and matching contributions to 401K plans have become a staple of many benefits packages; as well as being increasingly legislated in countries such as the UK where employers are required to provide pension plans for certain staff and contribute to these funds.

Yet despite these employer-sponsored benefits and perks, research has shown that many employees are experiencing some level of financial stress, which can have a negative impact on productivity. According to a survey of more than 10,000 Americans by Salary Finance, financial stress results in anxiety, loss of sleep, panic attacks, and depression, which can impede the ability to complete daily tasks and have a negative impact on performance. 

Financially stressed employees are, on average, losing up to a month of productive working days per year, with an estimated annual cost to employers of $500 billion. This is a great cause for concern among both employees and employers, begging the question of what can be done about it? 

As mentioned above, many employers have historically supported employee financial well-being with retirement and 401K matching programs. These programs demonstrate some level of an organization’s commitment to supporting the financial health of its workforce. But as the research has shown, many people are still struggling to make ends meet, even salaried employees earning up to six figures – this puts long term planning beyond the reach and contemplation of many. These financial stresses point to a challenge and an opportunity for organizations to do more to support employee financial health. The good news is that many organizations see the opportunity to do more to support employee financial well-being as the right thing to do and good for business. 

Looking again at Bank of America’s 2020 Workplace Benefits report, more than eight-in-ten employers across companies large and small believe employee financial wellness helps deliver more loyal employees, greater employee productivity, more satisfied and more engaged employees.   

Some of the common sources of financial stress for employees include managing credit card debt, student loans, healthcare costs, and large recurring payments such as a monthly mortgage. But organizations should ask employees directly about their financial concerns as a first step toward introducing additional financial wellness offerings for their workforce. This can be as simple as conducting an employee survey to gain insights into the specific financial goals, priorities, and potential stresses of an organization’s workforce.  

It’s also important to consider that today we have four and even up to five generations in the workforce – GenZ, Millennials, GenX, Baby Boomers, and the Silent Generation. Managing credit card debt is a common financial concern across most generations, while GenZ and Millennials are likely to be more concerned about paying off student loans, growing savings for unexpected financial events, and building a foundation for retirement. Whereas retirement concerns and paying off a mortgage are likely to be more acute among GenZ and Baby Boomers. Organizations should take the full range of these concerns into consideration when developing a financial wellness program for their current and future workforce. 

Once employee insights have been gathered (seek first to understand!), the next step is to develop a plan and programs to meet their needs. Financial wellness programs can include a range of elements from education offerings such as financial literacy webinars to an online financial wellness resource center. Employer-sponsored access to financial advisors is another great way to support employee financial health. This is a seriously challenging and emotionally stressful area for those dealing with it. It’s important to recognize this and not assume that little to no initial uptake of their financial wellness offerings means everything is ok.  It requires a strategic internal marketing and communications effort to ensure employees have multiple opportunities to respond, make inquiries and take action.

Flexibility in employee payment and payroll options can also play a role. Depending on the organization, some companies can consider offering pay on demand. Instead of the traditional weekly or biweekly paycheck, companies offering pay on demand can pay employees once their shift is completed. Walmart, Lyft, and Uber already provide this option to their workforce.  This can have a huge impact on pockets when the short-term/payday lending crisis interest rates can be upwards of 200% per annum. As well as this be aware of the unbanked workforce that could be cashing factored cheques, effectively paying tax on taxed income.  
    
Payslips are often an overlooked communication tool to support and encourage employee financial health.  Employee payslips can include notifications, alerts, reminders, and invitations on a range of financial wellness topics covering subjects such as financial wellness education opportunities, reminders about retirement, 401K, and pension plans.  Payslips can also include notifications about internal job openings, professional development, learning, and training opportunities. 

Financial wellness communications within payslips can be optimized with embedded links that guide employees to access information or sign up and register for educational resources, log into their retirement savings accounts, or create a new retirement account if they haven’t already. HR and payroll teams can collaborate on introducing these payslip enhancements and marketing them to the workforce to remind them to use these resources every time they receive a payslip. 

The Leaders Championing the Financial Wellness at Work Movement, an article by Dan Schawbel, provides examples of concrete steps leading companies such as Morgan Stanley are taking to bolster financial wellness support for their employees. Morgan Stanley provides a mix of financial education, financial advice, and financial solutions, as well as an independent marketplace for student loan refinancing that is demonstrating positive results for the company and its employees.  

Organizations in every industry and across the globe have an opportunity to take a close look at their current offerings to support employee financial wellbeing and consider what they can do to bolster these resources for the many people that research has shown could benefit from more robust programs. The good news is that both employers and employees stand to benefit when more attention is paid to these highly beneficial resources.