A recent report by PWC shows that finance is the leading stressor among employees experiencing financial instability. This problem can negatively impact your employees' overall wellbeing, spilling over into their professional lives.
Most notably, financial insecurity can reduce your employees' productivity, negatively impacting your business's overall performance (including sales and profits).
Besides sub-par performance, the company may also spend more money and other valuable resources when trying to address and solve the problems affecting employees' productivity.
Businesses cannot afford to ignore their employees' financial wellbeing, as doing so can be devastating. Many companies are adopting a pro-active approach by implementing employee financial wellness programs.
Here is an in-depth guide on the importance of employee financial wellness and how to create a program to support them.
What is employees financial wellness?
Definitions of financial wellness vary to suit different people's perspectives. Generally, financial wellness refers to being in a comfortable financial situation.
Ideally, a financially well-off person should have enough money to pay their daily, monthly, and annual bills and other expenses. Financial wellbeing also entails being able to set aside some money for savings and emergencies. Overall, the person shouldn't feel stressed or worried about their financial situation.
Unfortunately, many employees' financial wellness is wanting. Employees were dealing with financial difficulties long before the COVID-19 pandemic, but the pandemic has worsened the situation. The report by PWC indicates that the pandemic has worsened the financial wellbeing of about 63% of employees.
The COVID-19 pandemic has also left many people jobless or earning significantly less than before the outbreak. It has also disrupted the global economy, triggering the worst inflation seen in more than 40 years.
Another recent report by the Federal Reserve indicating that 40% of Americans don't have enough savings to cover a $400 emergency puts things into a clearer perspective. The report by PWC also indicates that 42% of employees are struggling to meet all of their household expenses.
Why does employee financial wellness matter?
Ideally, your employees shouldn't let their personal issues interfere with their work. However, it is impossible to disconnect your employees from some aspects of their personal lives, especially their financial wellbeing.
Your employees' personal financial concerns may spill over into their professional lives, negatively impacting your business.
Here is an overview of three notable impacts of an employee's financial wellness on your business:
Employees cannot be optimally productive when their attention and concentration are split between work and their financial challenges. The report by PWC indicates that about 45% of employees struggling with financial difficulties spend several hours at work thinking about their financial situation, which limits employee engagement.
It also indicates that financial challenges are the leading cause of stress among employees.
Besides distraction when working, employees' financial wellbeing also affects their productivity in many other ways.
For example, some employees may take up another job, which could take up time at their other job (working at your company) and likely leave them too tired to be optimally productive.
It is also worth noting that financial instability may contribute to certain medical conditions that could further compromise your employees' productivity.
In contrast, good financial wellbeing is reassuring, and employees can focus more on their jobs without worrying about their financial situation.
More notably, offering your employees financial security would motivate them to work harder and be more productive to retain their jobs (and the financial stability that comes with the job).
2. Healthcare Costs
Financial instability is the leading cause of stress among employees. This stress builds up over time and can compromise your immune system. To this end, research shows that stress caused by financial instability can contribute to a range of conditions, including:
- High blood pressure
- Night terrors
- Extreme tension
- Somatic issues
- Respiratory issues.
These and other illnesses can compromise your employees' productivity, but the repercussions for your business don't end there.
You have an obligation to your employees' health, and you will end up paying more in health insurance to help your employees manage these conditions – sadly, they may need ongoing medical treatment if the underlying issues (financial strain) don't improve, emphasizing the need for employee benefits and financial wellness programs.
These health conditions may also cause higher absenteeism, which costs employers about $250 billion annually. It is worth noting that implementing a healthcare program for your employees can reduce losses caused by employee absenteeism by up to 25%.
3. Employee Retention
All companies across the U.S. reported an average turnover rate of 57.3% in 2020. Most employees leaving their jobs are looking for better opportunities elsewhere, primarily higher wages and more benefits.
The report by PWC shows that 72% of employees facing financial challenges would be willing to consider working for another company that offers higher wages and more benefits.
Talented employees are an essential component of every business's operations. Unfortunately, it is becoming increasingly difficult to entice and hire talented job seekers. Hiring and onboarding new employees are also costly processes – companies spent about $92 billion on hiring and training between 2020 and 2021.
What is an employee financial wellness program?
An employee financial wellness program essentially is a range of benefits designed to improve employees' financial situations. This program goes beyond the usual financial benefits, such as retirement planning.
The goal of every employees' financial wellbeing program should be to help employees develop a positive relationship with their finances. More importantly, these programs should identify and implement solutions to employees' financial difficulties that go beyond offering advice.
How to develop and implement an employee financial wellness program
The concept of employees' financial wellness programs is still relatively new to many organizations. Many organizations don't know how to develop and implement one, which is understandable.
It is worth noting that your organization's financial wellness program should be tailored to suit your employees' unique needs.
To this end, a one-size-fits-all approach doesn't exist. However, every organization can develop by taking the following measures when developing and implementing one:
1. Assess your employees' needs
Your organization's financial wellness program should solve your employees' unique financial challenges. As such, it is prudent to start by finding out their needs. Can they meet their monthly expenses? Are they saddled with student loans and other debts? Do they have outstanding medical bills?
You can identify some of your employees' financial challenges from their personnel data. However, it would be more effective to have them fill out a questionnaire about their financial situation.
It is advisable to make the questionnaire anonymous and detailed to encourage maximum participation. More importantly, ensure that you verify your findings with the employees.
2. Identify internal obstacles & challenges
Your organization will face challenges and obstacles when developing and implementing its financial wellness program. The cost of developing and implementing the program is the most common challenge.
Other challenges include employees' reluctance to participate in the program and the potential liabilities tied to the organization's fiduciary responsibilities.
3. Choose implementation tools & strategies
How will your employees access the financial wellbeing program? Will they be required to attend in-person classes, or can they access the resources online? It is important to select efficient and reliable tools and strategies to implement your strategy.
The most reliable implementation solutions include digital platforms and apps that employees can access via their phones.
4. Establish clear communication with employees
Are your employees aware that your organization has a financial wellbeing program to help them manage their financial challenges? More importantly, do they know how to utilize the program? Sadly, many employees don't utilize the benefits offered to them by their employers because they don't know about them in the first place.
They are also reluctant to use these benefits because they don't know how the company may react – many employees fear that they may become a liability for using their benefits.
It is important to inform your employees about the financial wellness program during development and as soon as you implement it. More importantly, encourage your employees to utilize the benefits offered under the program without fear of stigmatization or scrutiny.
5. Establish metrics to monitor & measure progress
The employee financial wellness program will use up money, time, and other crucial resources, and it is important to ensure that the company is getting value for its investment. The business can measure the program's ROI by identifying metrics that can quantify the program's success.
Examples of employee financial wellness programs
An employee financial wellness program can offer many benefits, depending on your employees' unique needs and preferences. Examples of helpful and efficient financial wellness program benefits include:
- Creating an employee retirement plan.
- Giving employees access to emergency funds (through loans and advances).
- Perks such as free parking spaces and the occasional free lunch.
- Financial literacy classes and resources.
- Providing access to professional financial coaches and counselors.
- Offering student loan counseling.
- Offering company credit cards.
Many of these benefits are affordable and easy to implement for the company. More importantly, your employees will find them helpful.
Incorporating an employee financial wellness program into your other company benefits programs and HR strategy is important. The program would be beneficial for everyone, including the company.
To develop and implement an efficient employee financial wellness program, companies should start by understanding their employees' needs, especially their financial needs and challenges. More importantly, providing enough financial support is essential to ensuring that your employees are financially stable, healthy, and productive.