Wellness as an employee benefit has expanded in the last year or two to include more than just the physical aspect–it now wraps in financial, emotional, and other types of wellness as well. That’s a good thing, because 68% of workers rely on their workplace coverage for their families’ financial security, according to the Guardian Workplace Benefits Study

One topic that we don’t often think about, yet impacts our employees heavily, is personal finance.

According to this article from the Washington Post, approximately one-third of your employees are living paycheck-to-paycheck. In other words, without this week’s paycheck coming in, the employee and their family would be in an immediate financial crisis.

The first response for many leaders is, “Yeah, so what?” However, this can be an opportunity to impact the productivity and engagement of your staff, so there’s value in learning more about this issue.

Cost of Living Impacts

In retirement, Americans fear the rising cost of living. In fact, nearly half of Americans (47%) report being either “very concerned” (36%) or “terrified” (11%) that the rising cost of living will affect their retirement plans. This is according to a new study on Americans’ perceptions about inflation from Allianz Life. Furthermore, respondents claim they are either “very worried” (36%) or even “panicked” (11%) that they won’t be able to afford the lifestyle they want in retirement due to rising costs.

The study also found that:

  • Fifty-three percent of Americans report they would feel either “very worried” or “panicked” about paying for expenses if their income was frozen and they never received an increase in annual salary.
  • This concern is even greater among households with lower earnings – less than $50,000 per year – with  65% noting they are either “very worried” or “panicked”.
  • In retirement, nearly one-third of people worry they won’t be able to pay for the essentials because of the rising cost of living.

I can’t recall the author of the study, but I heard one last year that helped to ease my own anxiety about this issue in the workplace. The study looked at what predicted success in terms of long term savings in a company’s retirement plan. The results were shocking. The number one predictor of whether someone was going to save significant money in their 401k plan?

  • It wasn’t their expense ratio.
  • It wasn’t their fund selection.
  • It wasn’t the vendor they used.

The number one predictor of whether employees will actually have money in their plan when they are ready to retire is participation rate. If they contribute, they are going to be in better shape than their peers that spend their time looking for no-load funds or avoiding investing because of some concern about an impending market crash. That’s heartening, because the employee doesn’t have to be a rocket scientist or financial wizard to figure that out. Just. Get. Going!

Stress Impacts Productivity

We all know from experience—when you’re stressed, you can’t focus as keenly on the work you need to do. The American Psychology Association’s Stress in America survey showed that 76% of Americans cite money as a significant cause of stress.

  • How is Cameron supposed to focus on closing the sale when he’s worried about a debt collector calling him at work?
  • Do you think Isabel will be able to handle that new project after her spouse (the main breadwinner) passed away with no life insurance?
  • Will Joseph be able to work those extra hours when he’s already working a second job to try and pay his bills?

These are merely examples, but they are a very real picture of some of the situations that face our employees every day. Look around you—statistically one out of every three of those folks is one pay hiccup away from a financial meltdown.

It’s time to do something about it.

Keep in mind, this isn’t just a financial planning session with a retirement services provider. That interaction has its place in the overall financial puzzle, but what I’m talking about is more immediate help rather than support for a life stage that could be between 10 and 40 years away.

What You Can Do

For starters, you can begin providing resources beyond an EAP.

Yes, I know. Most of us like to be able to claim that we have an EAP while we secretly know that virtually none of our employees actually make use of the benefit. I’ve been there and understand. The data shows an average utilization of Employee Assistance Programs (EAPs) at just 5%

While employee assistance programs are fine to offer, they don’t do enough to engage and target the specific financial issues and stressors your people are facing. There are great resources available for helping to manage money. There may be a local financial planner that will visit with your staff, an educational training to help them understand how personal finance works, or a combination of remote and in-person resources to meet a variety of needs and preferences. I won’t endorse any particular provider here, but what you’re looking for mainly is someone with the heart of a teacher, not a salesperson.

Start training your managers and HR team to recognize signs of stress. A historically high-performing employee that suddenly has performance problems? That’s an opportunity to reach out. There’s no guarantee the change is driven by money issues, but if there’s a way to assist with the stressful situation and help the employee feel like he/she has support, that’s going to help solve the problem in the long run.

The Hidden Victims

I mentioned this in my previous article on the topic, and I think it’s worth bringing up here.

One issue that many don’t realize is that this affects people like our military pretty heavily. Having recurring or serious financial difficulties makes it more difficult for soldiers to maintain a security clearance (financial problems make you a target for foreign government intelligence). In fact, soldiers can be declared unfit for duty if they are unable to resolve the financial issues they have. Imagine losing your job due to a few poor financial mistakes, and you realize how serious this is.

This also applies to people working for government contractors. I used to manage HR for one of those firms, and many of our employees required a security clearance for their job. I can’t tell you how many times we had to turn down highly qualified candidates due to previous financial problems that could jeopardize their clearance status.

It’s one thing to lose out because you’re not the best candidate–it’s another thing entirely to find out that your foreclosure three years ago kept you from getting the job.

A Few Other Alarming Stats

Just when you think it couldn’t get any worse, here are a few other statistics that were shared at the Health and Benefits Leadership Conference last year:

  • .At all income levels, without continuing income, 50% of all households could survive only 131 days solely because of liquidating assets, including 401K balances.
  • On average, 30% of GenX retirees will run short of income.
  • Average 401K account balance is just $72,000.
  • For everyone under the age of 49 today, 18 years from now, your social security benefits will be reduced by 20%.
  • We have a $4.1 trillion deficit in personal savings for retirement and long-term care.
  • Personal savings rate was 12% in 1975 and was 5% in 2013.

Repositioning Retirement Benefits

Several years ago I attended the SHRM Annual Conference in Orlando, and my favorite session turned out to be one on retirement planning and 401ks. In the video below from the event, you can learn about one simple, yet profound, piece of information I picked up from that session.

Read more in my article 401k plans are NOT for suckers.

The Business Impact

As I said early on, this widespread issue impacts productivity and engagement. Removing the stressors can help to improve productivity, but there’s an additional benefit.

People naturally connect their circumstances with those who help them. If you make the effort to support the lives of your team members, they will mentally associate their improved situation with the efforts of the employer.

I have listened to stories from people whose employers offered help and supported them through tough financial times. The gratitude those employees feel after the fact is powerful stuff, and they can’t speak enough positive things about the companies they work for. Most of us would like for our staff to speak that highly of us as employers—the question is whether or not we’re willing to hold up our end of the deal.

You might have heard the phrase, “A man with a toothache cannot fall in love.” It’s a similar concept. When there is something especially painful or worrisome in your life, you just can’t devote your attention to other areas until that pain point is removed. Help your team remove that pain (financial or otherwise), and your organization will be better for it.

  • Does your organization have a financial wellness program? If so, what is involved?
  • What other stressors are found in the workplace that we could help employees with?

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  • 3 thoughts on “Financial Wellness Benefits: Employers are the Employee Financial Lifeline

    1. One of the biggest issues that you didn’t mention is how often employees do not take advantage of employer matching when it comes to retirement planning. Employees are often leaving thousands of dollars on the table by failing to contribute.

      As you mentioned, participation rate is crucial. One simple change could increase this rate. Instead of making 401(k) contributions optional for employees to choose, employers could switch to a system where employees have to consciously opt-out of the system.

    2. Interesting article! I would have to agree especially in a smaller company where budgets are extremely tight. I wanted to mention that we will be at the SHRM conference in June. Hope to see you there.

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