The days when a competitive retirement plan was the cornerstone of a quality employee benefit plan are gone. As the U.S. economy and cultural landscape continue to change, those in charge of employee benefits will need to consider updating their programs to satisfy changing needs. One of the fastest-growing requests is a financial well-being program, aside from mental health benefits.
According to a recent TIAA Financial Wellness Survey, only 22% of the 3,000 adults surveyed rated their financial wellness high. Rates were especially low for younger adults. Only 12% of Gen Z employees reported high financial wellness. Furthermore, those individuals who claim to have high financial wellness still expressed concerns around planning, emergency savings, and financial stress.
50% of employees say they think employers have a responsibility to help employees improve and maintain their financial wellness. Whether or not you believe that younger generations face more financial challenges than older generations, as a leader, it’s your responsibility to consider these requests for support with empathy and compassion.
As an employer, your perceived responsibility for your employees' financial wellness should be enough to inspire leaders to take another look at their employee welfare benefit plan and consider developing a more robust financial wellness program. After all, you’re responsible for their well-being. With the help of BrightUp, you could expand your benefits plan to include both financial and mental health support, all in one place!
So what does this mean for employee benefits? It’s time to revisit and revamp.
In this article we’ll cover:
- Why employee financial wellness is important
- What financial wellness benefits employees want
- Other benefits that can help your employees’ finances
- How to get started
Let’s dive in!
Why Employee Financial Wellness is Important
According to 181 corporate CEOs in the Business Roundtable, companies have a responsibility to invest in their employees by compensating them fairly, providing critical benefits, and supporting them through training and education that develops new skills. By giving each and every employee better opportunities to thrive, corporate leaders can foster diversity, equity, and inclusion.
A financial stress survey conducted by retirement and insurance plan provider John Hancock reported that 89% of workers feel it’s essential for employers to offer a financial wellness program. In addition, 74% say that a financial wellness program could help them reduce their financial stress.
Investing in financial wellness boosts the overall well-being of employees, increasing their health, productivity, and engagement. Don’t you want employees that are content and focused? Besides that, there are clear, measurable benefits to reducing financial stress in your organization.
The International Foundation of Employee Benefits Plans (IFEBP) ‘s 2016 survey illustrates the most important reasons to implement financial wellness benefits:
Leadership’s Reasons to Provide Financial Education
- Increase Employees’ Ability to Manage Money: 52%
- Improve Participant Retirement Asset Allocation: 42%
- Improve Understanding of Current Benefits: 42%
- Improving Satisfaction of Current Benefits: 36%
- Facilitate the Retirement Decision: 30%
The Impact of Financial Stress on the Organization
Outside of work, financial stress can cause physical and mental health issues for an employee. For example, they may feel anxiety about their ability to cover an unexpected expense or develop high blood pressure from the influx of stress hormones in the body. This financial stress can seep into the health of the organization.
Research shows that financial stress can negatively impact an organization in a handful of ways:
- Increased absenteeism
- Reduced productivity
- Higher healthcare costs
- Higher turnover rates
- Late retirement
In isolation, these problems may not seem like much of a concern. But in a large company with a large majority of employees feeling the pressures of financial stress, it could significantly impact the bottom line.
1. Increased Absenteeism
The IFEBP reports that financial stress can result in a 34% increase in absenteeism and tardiness in employees. A financially stressed employee is more likely to miss work days resulting in reduced productivity for your organization.
2. Lower Productivity
When financially stressed employees make it to work physically, they may not be 100% mentally present. Financial problems hurt an employee’s ability to get work done because they are distracted by the worry of their finances. A PwC financial wellness report says that 34% of Gen X, 16% of baby boomers, and 37% of millennials admit they’re distracted by their finances at work.
A 2020 study by the Global Financial Literacy Excellence Center (GFLEC) found that employees with poor financial literacy can spend as many as six hours during the workday per week thinking about or dealing with issues or problems related to personal finances.
3. Higher Health Care Costs
Everyone knows long-term stress can lead to significant health problems. Stress manifests itself in migraines, obesity, heart disease, accelerated aging, and more. In addition, financial stress makes an employee less likely to spend money and time on routine, preventative healthcare visits. A stressed employee is an unhealthy employee, costing you more in health care coverage.
4. Higher Turnover Rates
According to ADP, it costs employers an average of $4,129 and 42 days to fill and train a new position. The higher the pay and required still set, the higher the cost. Employees who do not feel their employer is taking care of their basic financial needs are more likely to seek employment elsewhere.
Those who stay are at risk and getting fired because of absenteeism and reduced productivity. That means more money your company has to spend on finding and training a replacement.
5. Later Retirement
Employees struggling financially are less likely to have enough money saved for retirement. That means they must stay in the workforce longer, and if your organization pays into their retirement, that means more money your company will have to shell out.
Simply put – financial stress is too costly to ignore.
Companies can’t afford to neglect their employees’ financial well-being. While you may feel that personal finances should stay personal, there are gentle and compassionate ways to address financial health through a well-constructed financial wellness benefits program.
What Financial Wellness Benefits Do Employees Want?
Retirement plans have been the main focus of most benefits plans for a long time – and they’re still a critical offering. However, the financial wellness gap has made them a much less effective tool for many workers with lower income levels. Many cannot afford to pay into their retirement accounts or have to take out emergency withdrawals for financial emergencies.
So if retirement plans are an outdated focus, what financial benefits do employees want? SHRM’s 2020 Employee Benefits Report has a few employee benefit plan examples. In 2020, only 24% of organizations provided non-retirement financial education, and only 17% provided credit counseling services.
Here are five areas to consider:
- Financial education
- Financial counseling and coaching
- Financial planning assistance
- Student loan repayment programs
- Employer-sponsored credit
1. Financial education programs improve employee financial literacy and empower employees to take control of their finances, get out of debt, and reduce financial stress.
Financial literacy gives employees better awareness and understanding of how money works and how to handle it responsibly. Financial education can help employees learn how to create a budget, manage and pay off debt, save for long-term goals like buying a home, or build a retirement nest egg.
An Employee Benefit News study reveals the percentage of participants who felt “highly stressed” about personal finances dropped from 52.4% to 19.2% after participating in a financial education program. Additionally, 56% of participants said they feel more equipped to manage their monthly cash flow.
Companies can work with a third-party financial benefits provider like BrightUp to provide personalized financial education for their employees. Check out some of our financial wellness tips.
2. Financial coaching takes a more personalized approach to financial wellness for employees. Employees can learn skills that make them feel more confident in their financial decisions by one-on-one working with a financial expert. The notion of having someone available to ask questions without judgment, and get answers they can trust, can completely change an employee’s economic outlook.
Confidence can be the most powerful tool of all regarding financial well-being.
3. Financial planning should go beyond a retirement plan. When paired with financial coaching, financial planning tools can help employees set and meet financial milestones that are catered to their personal goals.
And by the way, BrightUp offers these services for employers! Here’s a quick rundown of the many financial planning tools we can offer:
- Spend/Income Analysis – Employees can organize their finances based on spending and income categories to better understand where their money goes.
- Cash Flow Projections – Employees can better understand patterns in their cash flow. The “Ok to Spend” feature helps employees forecast financial obligations and plan ahead.
- Account Summary – Give employees a way to view all their banking accounts, credit cards, investments, and mortgages in a centralized view.
- Portfolio of Debts – Employees can understand all of their liabilities regarding credit card loans, mortgages, and personal loans.
- Goal & Savings Tracker – Employees can visualize and automate actions to meet savings milestones.
- Budget Tracker – Employees can leverage historical transaction data to review budget categories and make adjustments automatically.
- Valculator™ – This unique calculator can help employees understand how compounding interest can build wealth over time.
- Insights & Alerts – Provide employees with insights into their spending and saving on pinpointing opportunities to relieve financial stress.
- Net Worth Calculator – Employees can review their assets and liabilities to view their complete financial health.
4. Student loan repayment programs and tuition assistance programs are some of the more popular benefits listed in the TIAA 2020 survey. Yet, only 8% of employers offered student loan repayment benefits, and only 47% provided tuition assistance. Companies can show their employees that they’re invested in their continued education and professional development by offering programs that help cover tuition costs.
5. Emergency lending is newer to the scene of employee benefits.Everyone knows financial emergencies happen – whether from surprise expenses or taking on too much debt. But unfortunately, the average American doesn’t have a high credit score to give them access to money fast when they need it.
As an employer, you can provide financial flexibility by partnering with a provider who can provide compassionate capital. BrightUp can help give your employees access to Emergency Loans and Debt Consolidation loans when they can’t find lending elsewhere.
These are just a few ways employers can provide financial wellness benefits to their employees, but keep reading. We have some recommendations on other ways to reduce the financial strain on your employees.
Other Benefits to Consider
While you’re re-examining your benefits packages, HR professionals should consider a few other ancillary benefits like support for employee financial well-being. While these are not directly related to financial literacy or retirement, they can significantly reduce an employee’s financial stress.
Here are four more areas to consider:
- Paid family medical leave
- Flexible work options
- Generous paid time off
- Mental health benefits
1. Paid Family Medical Leave
According to SHRM’s 2020 Employee Benefits Report, due to the COVID-19 pandemic, flexibility for employees to take care of their families became more critical than ever. More than 2.3 million women left the labor force to become a caregiver for a loved one during this time.
Since 2016, Paid Maternity Leave coverage increased from 26% to 53% in 2020, and Paid Paternity Leave has risen from 21% to 44%. However, the length of time varies, and not all policies cover adoption or foster parents.
By providing extended paid family medical leave, mothers and fathers can decrease the financial stress of having a baby. They don’t have to worry about paying for expensive childcare and don’t have to worry about making ends meet while taking time off work. As a result, your employees will be more loyal than ever upon returning to the workplace.
2. Flexible Work Options
In addition to the glaring need for childcare benefits, COVID-19 also sparked interest in more flexible work options. SHRM’s 2020 Employee Benefits Report shares that 44% of employees want to work remotely full-time. Flexibility in work schedules can reduce stress in employees who have to pay for their commute or don’t have time to take care of errands during the day.
3. Generous Paid Time Off
Even if you want employees to remain in the office, increased paid time off can provide the same stress-relieving benefits as flexible work. Many stressed employees will skip tasks like doctor’s appointments or financial planning meetings because of strict time off policies. Employees who can take time off without worrying about missed income can perform better on their days in the office.
4. Mental Health Benefits
Mental health can have an enormous impact on an employee’s ability to perform and produce at work. As a result, more and more employers are expanding their health benefits beyond medical insurance to provide more resources focused on mental well-being.
While financial stress can sometimes develop mental health problems, the inverse can occur. Those who have untreated mental health problems are more likely to develop debt problems, which often worsen one’s mental state.
Expand Your Company’s Financial Support
As we have seen in recent years, employee recruitment and retention have become a significant challenge for human resource professionals who only cater to the best interest of executive agendas and not the needs of employees. As a result, the role of HR is changing. While they must remain a strategic partner for the organization, they must also become an employee advocate and a champion for change.
As an employee advocate, an HR professional must create a work environment to thrive. To achieve the performance and employee development noted above, employees must be motivated and content in their roles.
More and more, financial wellness plays a vital role in that motivation and contentment. Therefore, leaders need to consider employee assistance programs centered around financial health to support this need.
It’s time to look beyond the ERISA definition of employee benefit plan. Read our tips for launching an effective financial wellness program.
Get Started Today
If you’re ready to re-examine your employee benefits plan and incorporate financial well-being into your employees’ lives, it’s time to connect with us! We work with employers to understand the benefits that employees need the most, and identify the ones that may be used the least. Based on this information, we’re able to customize our financial coaching to make sure employees are receiving the education they need, therefore improving adoption and continued use.
BrightUp was built on five pillars: compassion, capital, content, coaching, and community. When you provide BrightUp to your employees, you’re giving them access to a full suite of wealth-building and well-being tools.
Contact a BrightUp representative on our website today. You can also call us directly on (833) 513-1302 or drop us an email at hello@getbrightup.com
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