The Importance of Employee Financial Wellness Programs

Employee financial wellness, like physical wellness, is a topic that companies are finally beginning to address. Just as employees are more productive and happy when they are physically well, they will be less stressed when they are financially well, too.

A recent article in Forbes reported that 80% of employers felt that financial stress was lowering their employees’ performance level. That financial stress is leading to depression, panic attacks, and sleepless nights, all of which cause costly distractions adding up to some $500 billion annually.

Here, right at the start of 2020, we are in the perfect position to do something about this. The beginning of the year is a time when people are naturally setting goals, including financial goals like paying off their debt and saving more. Financial wellness covers these, but it is also so much more. Just as our New Year’s goals can push us to be healthier and more fit in the coming year, employees can get the nudge they need to be financially healthy—provided they have the support.

Why Should Employers Offer Employee Financial Wellness Programs?

As mentioned above, financial stress is taking its toll on the workforce. Separate studies by the American Psychological Association and by Northwest Mutual found that money issues were the #1 stressor for American adults (reporting 72% and 78% with anxiety about their financial situation, respectively).

That stress translates into depression, sleepless nights, and even full-blown panic attacks, which in turn increase absenteeism, reduce productivity, and fuel high employee turnover.

Many of the reasons employees are stressed about their financial situation have little to do with employers themselves and the salaries they pay.

• Many millennials are heavily burdened with educational debt, more so than any other generation, and so are starting their careers with strong budgeting challenges.
• Boomers are saddled with their children living with them longer and taking care of their aging parents.
• Skyrocketing healthcare costs are another cause for concern for all generations.
• And of course, the recession of the last decade wiped out huge chunks of people’s retirement portfolios, pushing back their retirement timelines even as people feared for their jobs.

Though employers are often not the cause of financial stress, they are in a prime position to do something about it. The best way to combat the stress that comes with financial worries is to get educated (“financially literate”), form a sound plan with goals, and manage expenses sensibly until those goals are reached.

Employers can, and should, empower employees to do these things.

What Can Employers Do to Improve Financial Literacy with Employees?

Financial literacy starts with a solid foundation in financial know-how. Your employees don’t have to be accounting whizzes, but they should know basic terms and concepts for managing their personal financial lives.

Sadly, our educational system rarely provides that kind of education...but employers can make up the difference by incorporating financial wellness programs into their existing training.

For example, our content library has an entire section for financial wellness topics, including courses on:

• Creating a Budget. Most people don’t realize that their spending habits exceed their income. Learning to budget is a critical first step in reining in expenses and building wealth.
• Responsible Debt. Debt is the subject that keeps folks up at night but is rarely discussed. Still, no one likes to be in debt, but learning how to manage it responsibly sets one up for later success.
• Value of Saving. Our culture rewards having an “I want it now” attitude in consumers. If a person can master some simple ways to moderate their spending and stick to a savings plan, they will be better equipped to handle the bumps in the road of life.
• Understanding Credit Cards. A lot of debt in our culture accumulates because people don’t understand—or are outright misinformed about—credit cards. A simple education in how they work can save thousands over time.
• Employee Benefits. I am always amazed at how many employees in large companies fail to take advantage of their benefits. I’ve seen people unaware of benefits like EAP, FSA programs, development and mentoring programs, wellness programs, and everything in between. If you educate your employees about the benefits your company offers, it can go a long way to relieving that financial stress and improve their job satisfaction.

There are some related topics that can also be helpful when building an employee financial wellness program:

• The “time value” of money. This is part of our series on Business Math, and it covers ideas like interest, present value of an asset or investment, and future value. A course like this can break through some of the “math phobia” that some people naturally have and help educate them on some key concepts in personal finance.
• Stress management. Stress happens. Financial worries can add to stress, but even if one’s financial house is in order, stress can linger in the background. Why not also give your employees the tools to manage stress and minimize its effects? I would make this a definite addition to any employee financial wellness program

If you already have a training program in place, it should be fairly easy to offer these topics in addition to others. If you do, you’ll notice that, over time, your employees will be more financially literate and less anxious when it comes to addressing money issues (or getting help from someone to do so). As Ben Franklin once said, "An investment in knowledge pays the best interest.”

What About Other Employee Benefits?

Education is an important first step for helping your employees achieve better financial wellness. Beyond education, employees can help relieve financial stress through the employee benefits offered by the employer.

A few examples include:

• Healthcare coverage with several different plans so the employees with children and those that are single can choose the best plan that fits their specific needs.
• Employer contribution to healthcare coverage.
• Offering a 401k program with payroll deductions to make it easier for employees to plan for their future.
• Offering a 401k employer match with an attractive vesting schedule.
• Insurance (short-term and long-term disability insurance, life insurance)

It’s not enough to “check the box” after you create your initial benefits package. Employers should also take the time to review and compare benefits annually. No one enjoys annual benefits changes but if it saves the company and the employee money, it is worth the effort.

Consider Additional Employee Amenities

There are many cases where an employer can negotiate a better price for certain amenities than a single employee can with the group discount. These extras can also provide financial relief for employees but also inspire a productive work atmosphere.

• Paid parking for your workplace
• A casual dress code (casual clothes are less expensive and don’t require dry-cleaning!)
• Complimentary coffee, beverages, and (healthy) snacks
• Occasional company lunch
• Opportunities to work from home (less money spent on gas, less time on the road, no commute stress)
• Gym access or discounted membership
• Discounted warehouse store membership

Your company might already offer one or more of these. Think: Are there other benefits you can offer? What would they mean to your employees’ budget and improve the office environment and culture?

Don’t forget to educate your employees on all of your benefits. As I said above, it is astounding how many employees don’t take advantage of the benefits their companies offer. Make sure your employees understand their benefits, make it super simple for them to take advantage, and remind them periodically to do so.

How Employee Financial Wellness Programs Can Attract Top Talent

We are all seeing the impact of the labor shortage in the length of time it takes to find quality candidates to fill open positions. Candidate ghosting is now a topic of conversation as “no shows” for interviews is a common occurrence.

The top candidates are likely more heavily recruited and find themselves with multiple options and offers. Do you include the training opportunities in the offer package? The differences in the benefits could be the item that tips the scale in your favor if the salaries are comparable.

Consider the math in the 401K scenario for a candidate who has two offers with a salary of $50,000.

Employer 1

• Immediate vesting of 100%
• Match of 50% up to 6%
• Equates to $1,500 employer match in the first year

Employer 2

• 100% vested at 90 days
• Match of 25% up to 6%
• Equates to $562.50 employer match in the first year (a difference of almost $1,000)

Let’s expand the comparison and say that Employer 1 offers free parking. Employer 2 is in an urban location where monthly parking averages $100/month or $1200/year. The candidate will have to earn roughly $1600 in gross salary to net the $1200 for parking.

With just the 401K and parking components for comparison, Employer 2’s package offer is $2,600 less than Employer 1. The top candidates will do this math!

Interested in Better Financial Wellness Courses for Your Employee Programs?

Financial wellness courses can be a valued part of your company’s own learning culture, providing employees with useful life skills while improving your bottom line. You only need to find a good library of off-the-shelf training content that tackles these topics in an approachable (but not patronizing) way.

Here at HSI we spent a lot of time creating just such a library, with all of the above topics and more. My hope is that you will explore some of our sample content and consider it for your own employee financial wellness programs.

Additional Resources

• Benefits of Financial Literacy Training for Employees
• How Can Workplace Wellness Be Improved?
• 7 Ways Off-the-Shelf Training Content Brings Value to Your Organization.
• Financial Literacy Training Videos