How to Increase Workplace Loyalty with This Financial Wellness Strategy

Without a doubt, the pandemic has heightened employee financial stress – and along with it, the need for companies and organizations to help employees manage that stress. In fact, the most recent Employee Financial Wellness Survey from PwC¹ found that financial stress increased for 63% of employees since the start of the pandemic. And a 2021 John Hancock study² found that a clear majority (89%) of these employees believed their employers should be helping them overcome this stress.

Why Financial Stress Matters

Why should employee financial stress concern employers? Here’s a quick rundown of the numbers.

• Cost: Financial stress costs companies $2412 per employee per year³
• Productivity: In one year, a financially stressed employee will spend an average of 156 hours on the job distracted because of their financial situation⁴
• Retirement: Due to financial concerns, 4 out of 10 employees plan to delay retirement⁵. This can result in a cost of $50,000 per employee per year for your organization⁶. 
• Loyalty: Financially stressed employees are two times more likely to look for a new job⁷. 

So what can be done? 

It isn’t as simple as increasing wages or even offering bonuses. Your employees need to feel secure, and a great way to increase that security is by helping them create a strong savings strategy.

Employees Need Emergency Savings

The National Endowment for Financial Education⁸ shows that more than one in three employees (37%) is worried about having emergency savings. This concern is greater than:

• Retirement savings (31%)
• Job security (22%)
• Healthcare costs (22%)
• Housing costs (21%)
• Credit card debt (21%)
• Utility costs (20%)
• Loss of or reduced income (15%)

This is likely due to employees having to reach into their retirement accounts during the pandemic for such things as medical expenses, home repairs, and auto expenses⁹.

Keep Reading: 401k Withdrawal and Retirement Borrowing Should be a Last Resort – How Financial Wellness Can Help Your Employees

Because it is such a concern, employers who focus on helping their employees focus on emergency savings can reduce employee financial stress, thus increasing company loyalty.

Emergency Savings Programs

There are several different ways to help employees create and fund an emergency savings program. Here are the three most common.

Automatic Deduction Programs

Employees have money automatically deducted from their paychecks to fund an emergency savings account.

This is similar to funding a 401(k), however, the money put into savings is taxed income. Because the money is in a savings account, it can be accessed immediately with no penalties. 

401(k) Sidecar Account

This emergency savings account shares a platform with the 401(k) account. Employees designate a certain amount of money they wish to maintain in their emergency fund.

This money is deducted from their paycheck after taxes. When fully funded, pre-tax money is then directed into the 401(k) fund.

Employer Match Accounts

Employers can offer matching bonuses for emergency fund contributions, much like they do for 401(k) contributions.

These contributions, however, have a different tax status. Be sure to talk with a tax expert.

Financial Wellness Programs Can Help, Too

The Enrich Financial Wellness platform helps employees understand how they view financial matters and provides them with education, tips, and tools for creating stronger financial habits, such as increasing emergency savings.

Internal data shows that after using the Enrich program for one year, those with at least three months of emergency savings increased by 27%¹⁰. Additionally, more employees contributed to their retirement plans and paid off their credit cards each month.

Enrich can help you help your employees increase emergency savings, reduce financial stress, and increase company loyalty.

Learn more about Enrich impacts real world behavior changes.

1 - https://www.pwc.com/us/en/services/consulting/workforce-of-the-future/library/employee-financial-wellness-survey.html 

2 - https://retirement.johnhancock.com/us/en/financial-stress-survey

3 - https://retirement.johnhancock.com/us/en/financial-stress-survey 

4 - https://www.pwc.com/us/en/industries/private-company-services/images/pwc-8th-annual-employee-financial-wellness-survey-2019-results.pdf 

5 - https://www.pwc.com/us/en/industries/private-company-services/images/pwc-8th-annual-employee-financial-wellness-survey-2019-results.pdf

6 - https://www.prudential.com/corporate-insights/employers-should-care-cost-delayed-retirements 

7 - https://www.salaryfinance.com/us/inside-the-wallets-of-working-americans/ 

8 - https://www.nefe.org/news/2021/09/americans-display-concern-optimism-in-new-poll-on-financial-well-being.aspx

9 - https://www.thinkadvisor.com/2021/01/12/americans-tapping-401ks-iras-to-cover-basic-expenses-survey/ 

10 - https://www.enrich.org/financial-wellness-resources/financial-wellness-behavior-change-data-study