When you think about employee wellness, categories like physical, emotional and social probably first come to mind. But what is your organization doing to prioritize employee financial wellness?
For employees, their personal financial wellness is an acute concern right now.
So, what can employers do to address these mostly external factors that can impact employee wellbeing?
In this blog, we’ll discuss:
- What employees are focused on and what they expect from their employer
- Why you, as an employer, should care about this issue
- What you can do to help your team members and protect your business
What is employee financial wellness?
How do most define employee financial wellness? For them, it means freedom from uncontrollable debt and being prepared for unexpected financial emergencies. A lack of financial wellness means large debt accumulation and living paycheck to paycheck.
From employees’ perspective, a lack of financial wellness isn’t as simple as someone having spending problems. At each stage of life, employees may encounter major expenses – some unexpected. As examples, these may include:
- Childcare
- Elder care or any other supplemental care for a loved one
- Healthcare expenses
- Divorce
- Unplanned home or vehicle repairs
The other aspects of wellbeing, especially physical and social health, can have a serious impact on an employee’s financial wellness, and an employee struggling with financial wellness may find that it affects their relationships or causes stress-related physical health problems. The facets of wellbeing are interrelated, and there are many factors at play that determine an employee’s financial wellness. It’s also often the case that financial challenges are cyclical, and as soon as one is resolved, another one arises – almost like a game of financial stress Whack-a-Mole.
Why is employee financial wellness a concern?
Financial wellness is an important concern for employees today, with ominous signs ahead:
- Inflation has not only increased the costs of goods and services, but has increased interest rates as well. Employees’ spending power is diminished – as though they don’t earn as much money as they did a few years ago – while expenses have skyrocketed.
- U.S. consumer credit card debt has surpassed $1 trillion for the first time ever – and delinquencies in credit card payments are at their highest point in more than a decade.
- The pandemic-related pause on student loan repayments has ceased, resulting in another $1.6 trillion in debt owed by more than 40 million Americans.
- Economic uncertainty continues to cast a cloud over the near future. Some workers may question how this could impact their company, leading them to worry about their job security and how they’ll meet personal financial obligations if they lose their job.
Recently, PwC conducted its annual survey about the financial wellbeing of full-time U.S. employees representing a broad cross-section of industries and all organization sizes.
Notable findings include:
- 57% of employees cite financial stress as the number one cause of stress in their lives.
- Nearly 1 in 3 employees run out of money between paychecks.
- 53% of employees are most worried about expenses increasing.
- 44% of employees report that inflation has had a severe impact on their financial situation over the last year.
- 49% of employees find it difficult to meet basic household expenses on time each month.
- 59% of employees feel their salary has not maintained pace with the rising cost of living.
- Financial stress extends to employees of all income levels. Even among employees earning at least $100,000 per year, 47% are stressed about their finances and 15% run out of money between paychecks.
Impacts of poor employee financial wellness in the workplace
All this financial stress and worry don’t exist in a vacuum. It can impact every aspect of an employee’s home life and wellbeing, including self-esteem, mental health and personal relationships, for example. These employees may also experience more physical health problems associated with lack of sleep, proper nutrition and exercise.
Inevitably, financial stress also spills over into the workplace. After all, employees can have a hard time focusing on work when their personal lives are chaotic. When employees struggle in one area of their lives, it has implications for everything else.
The PwC survey found that financially stressed employees are five times more likely to say that personal finance issues have caused distractions at work.
Employees who are fixated on their financial situation are:
- Less engaged
- Less productive
- More likely to seek another, higher-paying job
Why employees’ financial wellness matters to employers
Focusing on employees’ financial wellness isn’t a fluffy, feel-good initiative.
Actually, it’s an investment in your business’ long-term success and growth. Financial health is a significant concern in the relationship between employers and employees.
People who are fixated on where their next dollar is coming from and how they’ll pay the bills likely aren’t spending much time thinking about quality work, good service and professional growth and development. You’re not getting their best efforts. Certainly, you don’t want a distracted and stressed workforce that produces sub-optimal output and interacts with customers in a less-than-desirable way.
You also don’t want to have to continually replace people who leave for a better salary – it’s costly and time consuming to recruit and train new employees.
Instead, you need engaged, motivated employees who bring the best of themselves to their professional roles.
However, solutions that worked in the past may not be sufficient for the challenges of the present and future.
Right now, against a backdrop of economic uncertainty, employers are faced with:
- A hyper-competitive job market
- Evolving employee expectations and demands in the post-COVID workplace
In responding to these factors that have exerted upward pressure on wages and benefits, employers must strike a balance between:
- Keeping an eye on economic headwinds that are causing inflation that outpaces wage growth
- Controlling budgets and managing the bottom line
- Considering how to attract and retain talent
Employers must continue to validate their compensation strategy to ensure they remain competitive. But increased salaries may not always be feasible.
So, what else can you do to help employees navigate these unprecedented times and work through their personal financial issues so they can focus on their jobs?
- Give employees solutions to their stress so they can focus on their jobs.
- Equip them with the specific tools they need.
- Direct them to the right resources at the right time.
If done thoughtfully, you can build a loyal, engaged workforce that serves a loyal, engaged customer base.
How to enhance financial wellness in employees
1. Adopt a culture of wellness
To maximize the potential of their people, the very best employers look at the whole health of each employee and their family members. This is what a culture of wellness is all about.
To start, recognize that:
- Every aspect of employee wellbeing is interconnected. If one aspect of wellbeing suffers, it touches everything else.
- Employee wellbeing impacts the workplace.
- It is your responsibility as an employer to proactively address employee wellbeing.
The five pillars of employee wellbeing are:
- Social
- Professional
- Physical
- Emotional
- Financial
The benefits package you provide to your employees should address all five pillars of their wellbeing.
2. Look beyond the 401(k)
Employees tend to think of a 401(k) retirement plan as a standard, commonplace benefits offering. Today, it should be only one part a more holistic benefits package that aims to enhance employees’ financial wellness.
Furthermore, a 401(k) is focused on the future and long-term goals – a more urgent and timely concern for older employees closer to retirement. Many employees, especially younger generations who are trying to create financial stability, grow their earnings and access cash for their present-day living needs, are focused on the here and now.
To provide robust benefits and services to employees at all stages of life, consider adding the following options to your benefits package:
- One-on-one financial coaching
- Educational resources to support financial literacy
- Connection to free resources who can help employees find certain services within their budget, such as childcare or elder support
These services are often provided through an employee assistance program (EAP), or can be provided as standalone services. (Financial advice is one of the little-known benefits of EAPs!)
According to the PwC survey, 74% of employees actively want help with their finances.
- Although technology can aid in finding resources, some employees may prefer a live professional with whom they can interact and ask complex questions.
- Some retirement plans offer access to financial professionals, but employees may appreciate the option to obtain advice from an objective source who does not earn commissions on financial transactions.
You may also consider providing periodic education – workshops or webinars – hosted by outside professionals that are focused on finances and money management.
3. Drive awareness of available resources
Your benefits won’t deliver much value if few know about them and use them.
Make sure employees are aware of the total rewards – all the available benefits, including financial wellness services – that you provide to them.
How can you do this?
- Emphasize this in your employee onboarding.
- Communicate regularly with employees.
- Find vocal, influential employees and encourage them be conduit to rest of the organization in spreading awareness.
There’s good news on this front: According to PwC, employee use of financial wellness services has increased from 51% in 2012 to 68% in 2023.
4. Work to reduce stigmas
Fortunately, employees’ embarrassment around seeking help with financial issues is decreasing. PwC reports that only 33% of employees view financial problems as stigmatizing, down from 42% in 2019.
Still, combat any existing hesitancy that may exist among employees in using your company’s financial wellness services by:
- Having leaders set the example
- Sharing stories of how the services have helped leaders and colleagues, even in ways that many employees may not have considered
- Reminding employees that these are widespread challenges impacting most everyone and covering diverse issues – “we’re all in this together”
- Assuring employees that the services are confidential
Summing it all up
The current environment has placed extreme financial stress on employees, which can not only diminish their physical, mental and social health, but can impair their professional performance in the workplace. Employers can no longer view personal and professional challenges as separate – instead, competitive employers of the future understand the negative impacts on business of ignoring employees’ financial wellness. They’re creating a culture of wellness and providing resources that aim to reduce this significant stressor in employees’ lives so they can focus on their jobs.
To learn more about this topic, catch the replay of the webinar: Employee financial wellness – Why it matters to employers more than ever.