Employers have an opportunity to rethink and redefine employee wellness, and financial well-being is an essential part of that conversation.
- Most Americans have received little to no financial education, and with more responsibility being placed on individuals, the level of knowledge needs to rise.
- Americans report significant levels of stress about their finances and savings rates and the need to use time from work to address financial matters.
- Employers have an opportunity to link financial wellness to a broader definition of wellness that includes physical, mental and emotional health.
The pandemic has changed the way many Americans think about their finances. While some employers added or expanded health and wellness benefits over the last year, most employers (74%) did not1. As employee needs continue to shift in a post-pandemic time, employers have a significant opportunity to rethink, improve and redefine wellness in the workplace. Here are 10 reasons why financial wellness in the workplace matters now more than ever.
1. Employees continue to bear greater levels of financial responsibility
With the shift from defined benefit to defined contribution retirement plans, individuals are in charge of deciding not only how much to save but also how to invest their retirement savings. People are living longer, costs are rising and American workers are being asked to make informed and complex decisions with little or no education to help them do so. The ability to understand personal finances more clearly and make sound decisions is critical and has long-lasting consequences for financial security.
2. Personal finances are a significant source of stress at work
Finances are the number one source of stress2 for Americans, topping work, health and even family issues. Financial stress impacts employees at all income levels: according to the Society of Human Resource Management, 80% of employers report that financial stress is lowering their employees’ performance levels and costing them half a trillion dollars annually. The pandemic has taken an economic and psychological toll on American workers, adding to the strain caused by the need to manage multiple and often competing financial goals.
3. The state of Americans’ financial health is not good
Americans in general are struggling financially due to low assets, high debt, inadequate savings, money management challenges and insufficient financial literacy. These factors contribute to high levels of anxiety and stress. In a recent survey by the Global Financial Literacy Excellence Center (GFLEC), 60% of respondents indicated feeling anxious when thinking about their personal finances, while 50% said they feel stressed when discussing their finances. Research confirms that low levels of financial literacy are linked to decreased financial security, increased stress and anxiety, and problematic financial behaviors, such as borrowing from 401(k)s and spending that exceeds income.
4. Americans spend significant time during their workday navigating money management problems
According to a recent study³ adults in the US with low financial literacy spend an average of 12 hours per week, including six hours while at work, dealing with personal finance issues. This compares to three hours a week for adults with high financial literacy, including one hour while at work.
5. Employee financial wellness improves your bottom line
Research from the Chartered Institute of Personnel and Development reveals that lost productivity and increased absence and employee turnover associated with financial stress have cost employers billions of dollars. Employees who worry about their finances are likely to be absent from work more often. When they report to work, they tend to have difficulty concentrating and are more likely to suffer from health issues. Improved financial literacy can directly reduce employer expenses, such as wage garnishment and 401(k) loan processing fees. As employees better understand and utilize FSA and HSA accounts for medical costs, the employer FICA tax savings can quickly reach six figures annually.
Research from the Chartered Institute of Personnel and Development reveals that lost productivity and increased absence and employee turnover associated with financial stress have cost employers billions of dollars. Employees who worry about their finances are likely to be absent from work more often. When they report to work, they tend to have difficulty concentrating and are more likely to suffer from health issues. Improved financial literacy can directly reduce employer expenses, such as wage garnishment and 401(k) loan processing fees. As employees better understand and utilize FSA and HSA accounts for medical costs, the employer FICA tax savings can quickly reach six figures annually.
6. Your employees want better well-being benefits
According to a recent Voice of the American Worker study,4 more employees than ever are asking their employers for financial well-being benefits, including incentives. Three out of four employees in the study said they want their workplace to provide more resources to help them with their overall financial well-being, and 79% said they believe their employer should provide incentives for good financial habits, with 78% saying the same about incentives for good health habits.
7. A financial wellness program can help you retain your current employees and attract new talent
Employers who get work/life integration and wellness strategy right are well-positioned to win the battle for top talent. The revised definition of wellness recognizes that it encompasses good mental, physical, emotional and financial health. By adopting this expansive definition, employers demonstrate that they want their employees to be successful not just at work but in all of life.
8. Younger workers tend to need more help
By 2025, millennials will make up three-quarters of the workforce and their financial fragility is cause for concern. They demonstrate a low rate of financial literacy (16% compared to 34% of older working-age adults) and high rates of financial anxiety (65%) according to a recent study5. When comparing millennials to older working-age adults (individuals age 38-64), millennials are more highly indebted with student loans, more commonly engage in expensive money management behaviors (using alternative financial services, overdrawing checking accounts, withdrawing retirement assets to meet loan and hardship needs), are less likely to plan for retirement and have money set aside for an emergency. The younger members of this group need financial education and counseling targeted specifically to their generation.
9. You can’t focus on retirement savings only
Many employers rely on their 401(k) providers to respond to the financial needs of employees. But because these providers sell investment products and services for a fee and are focused on their core retirement business, many important personal finance topics are not addressed. For a comprehensive financial wellness effort to be effective, employers need to seek objective and credentialed professionals who view the employee holistically, can strategically integrate employer benefits based on individual needs and goals, and can form a relationship with the employee throughout their wellness journey.
10. A financial wellness benefit allows you to redefine, realign and enhance your benefits program
The employer/employee relationship has changed, and employees want and expect employers to look out for their well-being. Realigning benefits with a broader culture of wellness in mind supports what employees are looking for and makes it easier for them to maximize their benefits and know that you have their wellness top of mind.
https://www.ey.com/en_us/tax/ten-reasons-why-wellness-in-the-workplace-matters
