In January, PricewaterhouseCoopers conducted its 10th annual Employee Financial Wellness Survey1.
It is not surprising that COVID wreaked havoc with financial wellness and increased financial stress significantly.
What may be surprising to employers, especially since many underestimate employee financial health2, is the extent of the problem.
According to the study, financial stress is the top stressor for employees with 65 percent of those surveyed stating this stress has increased since the start of the pandemic.
In fact, financial stress tops the next three stressors (job, health, and relationship) combined and as a result, financial wellness has become one of the most desired benefits programs for 2021.
Your employees experiencing an increase in financial stress are four times more likely to have a lower household income than at the start of the pandemic, thus making it more difficult to meet day-to-day expenses.
This has led to such behaviors as using payday and retirement account loans, both indicators of poor financial wellness.
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However, all is not lost. The survey suggests four things to do to help your employees gain financial wellness even during trying times.
Step 1: Understand The Bottom Line Impact of Financial Stress
When you have employees that are financially stressed, your company's bottom line suffers.
The PwC survey found that employees experiencing more financial stress since COVID are:
- Four times more likely to be distracted at work
- Far more likely to switch companies for one that cared about their financial health
- Twice as likely to avoid needed medical procedures
- Twice as likely to consider delaying retirement
The costs for these behaviors are significant. According to a GCC study3, the cost of presenteeism – being at work but not giving work your full attention - is a full 10 times higher than the cost of absenteeism, with distracted employees working at approximately 75 percent capacity.
Worldwide, presenteeism costs companies $1.5 trillion each year.
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Employee turnover is also quite costly to businesses. A CAP study4 found that the average cost of employee turnover is 16 to 20 percent of the employee's annual salary for low and mid-range paying positions and 213 percent for executive positions.
Three out of four employees are experiencing more financial stress since COVID and said, they would leave their employment for a company that cared about their financial stress. This makes helping employees gain financial wellness imperative.
Another expense that rises with financial stress is healthcare. Health insurers determine costs based on consumer profiles – how likely a group will need specific kinds of care.
Then they multiply the number of patients by the estimated cost of care, add in their profit, and come up with the annual premium.
When employees skip needed doctor visits or medication, they are more likely to exacerbate the problem.
For instance, catching diabetes early can reduce complications such as heart disease, stroke, and kidney failure5.
Because health insurers know that employees are skipping needed appointments, they will have to calculate extra visits, medications, and procedures, thus increasing the cost of providing healthcare coverage to employees.
Those using a financial wellness program, however, decreased their healthcare costs by 4.5 percent or about $271.50 per employee.
Finally, employees that choose to delay retirement increase a company's operating costs.
A study by Prudential6 found that a one-year delay in retirement can cost a company $50,000 in higher medical expenses, sick leave, life insurance costs, and salary differences.
Once the cost of financial stress is understood, it is much easier to make a case for providing real solutions to the problem.
2. Offer Benefits That Meet the Needs of Workers
Once you understand the bottom line of financial stress, it is time to understand specific stresses experienced by your employees.
Employees are concerned about meeting bills, catching up on deferred payments, having to use retirement funds early, the lack of emergency savings, caring for dependents while working from home, eviction, foreclosure, bankruptcy, credit card debt, student loan debt, and more.
PwC suggests that companies can help by offering personalized benefits for individual employees. Consider such options as:
- Student loan repayment plans
- Retirement options
- Healthcare plans
- Dependent care
- Workplace flexibility
The point is to look at incentives and compensation in terms of the individual rather than the workforce as a whole.
Individualized benefits can help each employee where they hurt the most while providing them with more control over their financial stress.
3. Capitalize on Good Habits Created During COVID
Due to COVID and the financial distress it caused, some employees, out of necessity and fear, began changing their financial habits for the better.
- 8 percent more employees now save 10 percent of their income (58 percent vs. 50 percent from the 2020 survey)
- 72 percent have more than $1,000 in emergency savings vs. just 62 percent last year
- Two-thirds of employees have changed their spending habits like reducing the cost of essential items and postponing major purchases
These new habits are in line with financial wellness; however, they are not likely to last without a push from employers. Employers need to encourage employees to manage their money and prepare for the future.
One of the best ways to help employees prepare for their future is to offer a holistic financial wellness program. This benefit should be one that:
- Engages employees, even during times when they are not in a financial crisis
- Provides unbiased financial guidance including planning, prevention, and intervention
- Helps employees drive positive financial behavior change
- Uses technology to provide personalization, gamification, and multimedia sources
By adding financial wellness to your benefits package, your employees can learn the needed skills to decrease financial stress and increase financial wellness.
As you help your employees become financially successful, you'll see your company's bottom line increase as well.
Helping employees achieve financial wellness is a win-win situation.
To learn about the Enrich Financial Wellness platform, watch this video.
1 - https://www.pwc.com/us/en/services/consulting/workforce-of-the-future/library/employee-financial-wellness-survey.html
2 - https://f.hubspotusercontent10.net/hubfs/6251712/Unseen-Costs-Immediate-2021-02-01.pdf
4 - https://www.americanprogress.org/wp-content/uploads/2012/11/CostofTurnover.pdf
5 - https://www.niddk.nih.gov/health-information/community-health-outreach/information-clearinghouses?dkrd=lgdmw0001
6 - https://www.prudential.com/corporate-insights/employers-should-care-cost-delayed-retirements