How Employers Can Provide Financial Support to Workers
Employee financial well-being matters as much to businesses as it does to individuals. Recent surveys have shown that as many as 78 percent of Americans would struggle to handle their finances if they missed a paycheck. That creates financial stress, which causes employees to miss more work and become less productive and engaged.
Most hiring professionals are feeling the strain of financial problems on employee performance. 83 percent of HR professionals say financial challenges negatively impact employees at work. And employees seek the support of the companies they work for; 79 percent of workers would prefer additional benefits to a pay raise. These are two of the reasons why the share of employers offering financial wellness programs has more than doubled since 2015. The benefits offered through these programs not only help workers achieve financial stability, but they also improve employee performance and retention.
As technological innovations and free resources become more readily available, businesses can leverage these tools to implement low-cost solutions to financial setbacks for employees with an excellent return.
5 Ways Employers Can Provide Financial Support
Helping employees prepare for retirement
Most Americans aren’t prepared for retirement, and that leads to financial stress that can interfere with work performance. One of the main reasons Americans aren’t saving enough is that they don’t have access to retirement savings plans, the Center for Retirement Research at Boston College found.
At the same time, 401(k) matching programs are an attractive feature to potential job candidates, making them an important way for businesses to set themselves apart and retain talented employees.
Most companies are aware of the benefits of offering such programs, which is why a survey from Willis Towers Watson found that more employers are making enrollment automatic and increasing their contributions to employee plans. And new federal and state legislation could improve financial outcomes for the 55 million Americans who don’t currently have access to retirement savings. A new Department of Labor rule that went into effect this year that makes it easier and less costly for small businesses to offer the plans, and many states are establishing automatic IRAs to encourage employee participation.
Helping employees weather emergencies
When faced with an unexpected $400 expense, 39 percent of adults wouldn’t be able to cover the cost without borrowing money or selling something valuable. When employees don’t have an emergency fund and expenses such as car repairs come up, that can lead them to miss work. 37 percent of HR professionals say employees have missed work due to a financial emergency. And reduced income can make it even more difficult for families to weather unexpected expenses.
In order to avoid this cycle, employers can provide automatic savings programs to help workers stay proactive, so they’ll be prepared for a financial setback. Many employers also now offer on-demand pay or employee loans. Of the 19 percent of organizations that offer third-party loans to workers, 73 percent say the benefit has a positive impact on financial management.
Assisting with student loan repayment
Employers are taking notice that millennials and Gen Z workers are struggling under the weight of their student loan debt, and more companies each year are offering repayment assistance to younger workers. Still, only about 8 percent of companies provide the benefit, according to the Society for Human Resource Management.
That could change as companies aim to attract younger talent in a relatively strong economy. There’s no question that the benefit is important to millennials; most (58 percent) would trade a vacation day for repayment assistance. And since student loan debt causes more stress on average than any other type of debt, it also has the greatest chance of rendering workers less productive and engaged, if companies fail to intervene. However, some experts argue this isn’t the best use of a company’s resources, and that a higher paycheck and better retirement savings options would be more impactful.
Encouraging employees to be proactive about their health
A lot of the health effects of financial stress, which range from chronic pain to an increased risk of heart disease, can be mitigated by health-promoting behaviors such as proactively getting routine checkups.
There are a few ways employers can support their workers’ preventative healthcare measures: First, they can offer better plans with lower deductibles and premiums. Only one in seven Americans with employer-provided coverage have no deductible, and people with high deductible plans often forego preventative care, which leads to higher costs down the road. Second, employers should assure their workers that they won’t be penalized for missing work due to their healthcare needs, and should offer enough paid time-off for workers to schedule necessary doctors’ appointments. And third, employers can offer savings assistance and employee loan programs to help prepare workers for unexpected healthcare costs.
Providing enough vacation time
The U.S. is the only developed country that doesn’t legally require vacation time, and even as more employers offer PTO and open vacation policies, workers are leaving vacation days unused. The average worker didn’t use four of their vacation days in 2018, up from three in 2005, according to Experian. And 15 percent of Americans didn’t take any time off the same year.
That’s a problem because a vacation of the low-stress variety is healthy for employees and improves their performance. Vacations that are well-planned to reduce stress can increase employees’ energy and productivity when they return to work. Employees who don’t take vacations, on the other hand, may be left with higher levels of stress that contribute to decreased performance.
Providing financial education
While 80 percent of adults need financial education to make smart choices about their finances, only 63 percent of their organizations offer it. But the benefit is growing: An additional 19 percent of organizations plan to step up education efforts in the future, and a separate survey found that 78 percent of businesses plan to increase retirement planning resources and education within their organizations.
Financial literacy efforts are crucial because many people need help to understand how to use other financial benefits offered by their employers. For example, an opt-in 401(k) plan will do little to secure a healthy financial future for an employee who doesn’t understand why they should contribute to the plan.
Furthermore, financial literacy is an effective intervention for the health issues caused by financial instability. Better financial education means employees make informed choices about their money and are more likely to engage in health-promoting behaviors than unhealthy ones.
Employers have plenty of tools at their disposal for improving financial wellness in the workplace. While it’s up to each company to choose the benefits that work well for employees, it’s likely that some combination of the benefits we’ve discussed will result in the greatest gains in morale, retention, and productivity.