According to a recent WorldatWork study, about 70% of employers offer some sort of financial wellness benefit, and more than half of them intend to expand such offerings in 2020.
Employers find financial wellness a compelling benefit to offer employees for several reasons. Providing financial wellness benefits generally leads to more engaged employers because about 90% of workers believe that the benefit demonstrates how much their employer “really cares about their employees,” according to a survey from MassMutual.
That same survey found employers find that financial wellness benefits are not only good for workplace morale, but also cost effective. About 80% of employers also say that the opportunity to support employees at a minimal cost while being on the “cutting edge of benefit offerings.” The right financial benefit can also help employers gain an advantage in hiring and retaining talent.
More importantly -- it’s a benefit that employees actually want and need. Fewer employees rated their personal financial wellness as good or excellent in 2019 than they did the previous year. Reports also show that nearly three-quarters of employees say that financial wellness benefits are important for an employer to offer and about 60% say they’d be more likely to stay at a job if their employer offered financial wellness benefits that help them better manage their finances. And as COVID-19 is demonstrating, unpredictable events can quickly exacerbate anyone’s financial situation.
Financial wellness continues to be an increasingly important focus. But employers need to examine the gaps in addressing financial wellness for their diverse workforce. Here are a few of the gaps employers can address as they expand their financial wellness benefits:
Why Financial Wellness Benefits Need to Also Think Short Term
While there is an array of financial wellness benefits employers are currently offering, they’re not necessarily accessible or helpful to employees based on their current financial situations. Some of the most prevalent financial wellness benefits employers provide are digital tools and content (67%), calculators for gauging financial wellness (66%), retirement planning (62%) and financial advisers (60%). These are great tools for long-term financial wellness, but these programs lack compelling financial tools that help employees who live paycheck to paycheck.
And the vast majority of the workforce lives paycheck to paycheck: the American Payroll Association finds that 74% of employees would experience financial difficulty if their paycheck were delayed a week. This financial instability impacts both salaried and hourly employees. That’s why employers need to offer a financial wellness benefit that helps employees with day-to-day challenges. This is especially important for hourly employees, whose unpredictable schedules can lead to high degrees of pay variance and who are especially vulnerable during economic downturns. That makes it even more challenging to build savings and that ever-important emergency fund.
Why Employees Struggle with Short-Term Financial Wellness
Several factors make it difficult for employees to find short-term financial stability. The rising cost of many major expenses, such as higher education, housing, and health care, have outpaced the growth of wages. The majority of the workforce is Millennial and Gen Z, who may be more financially vulnerable than previous generations. Many young workers are trying to build savings with limited job opportunities while still carrying high levels of student debt.
And across generations, the unprecedented economic events this year have left many people and companies in precarious positions. Late bills and limited options can saddle employees with even more fees or force them into predatory options. Providing employees with the safe, vetted tools that allow them to find greater financial stability to address the short-term better positions them to increase their financial wellness and reach mid- and long-range goals.
How Employers Can Fill Today's Financial Wellness Gaps
Equip employees with benefits that can help them address small, tangible steps and goals. Among the types of financial wellness benefits you plan to offer, make sure that there’s tools that encourage budgeting and building an emergency fund. Because hourly workers experience so much pay variance, a budgeting tool can be especially useful for them to review upcoming expenses alongside with how much they’re anticipated to earn. Having a strong handle of short-term finances and personal cash flow will better position employees to prevent unexpected financial emergencies from derailing their expenses. Once they’re confident in their ability to manage their short-term savings, they’re better able to plan and meet longer term goals as well.
Another financial wellness solution that can help with short-term cash flow is earned wage access (EWA). Also known as early wage access or instant pay, EWA allows employees a way to access a portion of their earned wages ahead of their paycheck, when they need it. Employers are increasingly adopting this tool because it can help employees address timely expenses and avoid overdrafting or going into debt. Several EWA providers offer free alternatives that are much safer than predatory loans, so that employees aren’t burdening themselves with unnecessary fees. An employer-sponsored option reassures employees that they’re working with a trusted solution. Employers can also set parameters on how much an employee can access, safeguarding employees from taking out too much.
And when evaluating new financial wellness benefits, make sure that they’re cost-effective for both employers and employees. Costly programs will often deter employee participation. A financial wellness benefit should help employees eliminate unnecessary fees, not bring them more. Those fees add up, when they could be better applied to an emergency fund or retirement savings contribution.
Regardless of what types of benefits employers choose, they should have a plan for raising awareness and informing employees that these benefits are available. Oftentimes, we’ve seen employers adopt a promising program, but not take the steps to educate and advocate for the benefit. That additional communication from managers and HR teams can be the difference between 12% adoption and 80% adoption. A financial wellness benefits provider can help you implement, inform and engage your employees. No set it and forget it here. Like any impactful program, a financial wellness benefits program should evolve to meet employees’ needs.
The best benefits go beyond providing just one offering, developing new tools to better serve employees and help employers fill those financial wellness gaps.
About the Author
Atif Siddiqi is the founder & CEO of Branch.