Why is Employee Financial Wellness Important?

Even while unemployment in the US is at a record low in 2019, 67% (an all-time high) of the country's employees reported being financially stressed. (Source: PwC)

Could there possibly be a better indicator of how 'being employed' is just not enough? Time and again, employee financial well-being is strongly correlated with a firm's performance, yet scores of organizations fail to get their basic employee financial benefits right.

Furthermore, employee financial wellness and benefits are critical while evaluating job opportunities.

Why is financial wellness a must-have employee benefit?

The 'employee wellness' focus is due to get more critical in 2021, based on the business roundtable held by nearly 200 CEOs of the world's best brands. They declared - indicating a paradigm shift in corporate priorities -that shareholders were no longer the focus of companies; instead, their employees were.

Many employers fear the high-cost barriers to offering financial wellness programs. They probably are not aware that new-age financial offerings have made these programs economic.

Technology enables better flexibility, options, cost-benefit, and easy availing of these employee benefits - helping better satisfaction. Employers can bundle their financial wellness offerings even with financial content tools, financial wellness calculators, and financial advice - at almost zero additional costs.

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Employee financial wellness: Problems your employees are facing right now

Before structuring a financial benefits program, it is first essential to understand the anatomy of financial issues of an average employee, as given in the PWC Employee financial wellness survey conducted in 2019.

This survey studied 1,686 full-time employed adults with representation from Gen Z, Millennial, Gen X, and Baby Boomer generations.

1. Cash flow and debt challenges

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Over one-fifth of adults had significant, unexpected medical bills to pay, with a median expense of $1,200. (Source: The Fed)

The inability to save sufficiently is one of the top problems employees face and is associated with insufficient cash flows and mismanaged debts. The PWC 2019 employee financial wellness survey finds that meeting even small, unexpected expenses becomes challenging for 62% of the Millenials.

The survey further uncovers that compensations tend to not keep up with the surging cost of living and that covering even everyday expenses is a struggle. Accumulated debts are another critical issue, owing to credit card penalties and student loans.

2. Inefficient retirement plans

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$112,300: The size of the average 401(k) balance in the fourth quarter of 2019.

Employees end up saving less and thus are more likely to raid retirement plans before retirement. 80% of US workers expect to work even after retirement because they project themselves being financially insufficient shortly.

Traditional retirement planning programs fall short of addressing these newer expense trends and do not address factors that could cause employee stress.

3. Lack of financial planning

Lack of sufficient financial awareness training and support makes employees myopic of their future finances. For instance, only 43% of the Baby Boomers due to retire in the next five years have estimated how much they would spend during retirement. The inability to look into future expenses contributes heavily to the financial stress that impacts work productivity.

4. The burgeoning sandwiched generation

Family spending has increased because many employees have dependent children and parents. Nearly half of the employees with adult children surveyed in the PwC study provide financial support. To address this problem, employers should plan benefits around the employees' family spending as a whole.

5. Student loans

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In the USA alone, student loans have reached a record of $1.6 Trillion. (Source: Forbes)

The student loan predicament is here to stay. Almost 50% of millennials have at least one student loan. Even 10% of Baby Boomers still have a student loan. 80% of the millennials claim that these loans take the rest of their financial plans off-track. A few employers like Staples and PricewaterhouseCoopers have taken up student loan repayments to reduce this debt burden on their employees.

Best Employee Financial Benefits for 2022

Many organizations efficiently rode the wave of newer financial offerings that gives maximum benefits to both the employer and employees without breaking the bank.

Based on trend studies of Glassdoor and SHRM, the following is the list of top financial benefits for 2021.

1. Better bonus payouts

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41% of employees ranked bonuses as their most preferred holiday perk. (Source: Spherion)

Bonuses are transforming to become 'strategic' from being just 'cash payouts.' Instead of cash, 63% of employers offer service anniversary awards, 51% offer employee referral bonuses, and 48% offer spot bonuses, according to this SHRM study.

Experience bonuses are also on the rise - that offer trips or events to employees that they might otherwise not splurge on - like a concert or tickets to a tournament.‍

2. Help with student loans

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78% of workers with student loan debt want their workplace to offer student loan benefits. (Source: PR Newswire)

With student loans being a rising financial issue with the new generation of employees, employers use third-party student loan repayment plans to help repay debts.

These repayment agreements come with the employees agreeing to stay back for a fixed number of years after the loan repayment. Student loan repayment offers increased by 4% in 2019- according to SHRM's annual survey of employers.

3. Personalized financial advice

Looking beyond 401(k) opt-ins, employers need to provide their employees personalized advice and financial benefit offerings. SmartDollar is a financial wellness program in Tennessee that provides access to information and financial advice tailored to the individual's situation and goals. While credit cards have an expiration date, your debt does not. credit card debt is one of the most common forms of debt that Americans carry. If you're struggling with credit card debt, it's important to develop a plan to pay it off.

Additionally, employees are offered retirement planning and investment advice online or one-on-one. There are dedicated online financial consulting services like Funds Tiger that offer ongoing credit score consulting and financial health checks. Service providers like 7Prosper offer financial planning and consulting on investments, financial goals, portfolio management, debt management, insurance, and taxes.

4. Paid time offs and remote working options

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65% of workers think they’d be more productive working at home than in the office (Source: FlexJob)

For new parents, caretakers, or employees facing personal emergencies– genuine offerings of paid time off and remote working options save them considerable sums of money and, resultantly, better financial stability.

Many companies are joining the remote working provision bandwagon probably why offerings on paid leaves have increased by 3% and telecommuting increased by 5% in 2019. Companies are also increasingly giving paid time off (up by 62%), personal leaves (up by 5%), parental leaves, and family leaves.

5. Microloans

Assistance with short-term financial issues helps employees meet ends. Employees are living paycheck-to-paycheck benefits significantly from low-interest installment loans and credit that help employees avoid payday loans, credit card overdue, and emergency cash crunches.

Zest Money, for instance, offers zero-cost EMIs for employees to avail themselves. Similarly, Avail Finance offers micro ticket-sized loans that can be available from the employee's smartphones.

6. Retirement plans and investments

Over the past few years, organizations have continually improved their contributions to retirement funds and the adoption of retirement plans. These efforts are projected to grow in the coming years - helping employees save a larger share of their salaries.

Traditional and Roth 401Ks are on the rise instead of custom company plans and SERPs. In other words, companies find more benefit in government-managed pension funds than custom-managed ones.

Employers tie-up with investment firms like Orowealth, which offers investment advice at zero commission, and Zerodha offers online stockbroking. Life insurances for employees, dependents, and terminal illnesses are also rising.

Focusing on financial wellness and having it as an integral part of the employee benefits program of 2021 is critical in addressing key employee challenges. It is essential to study each employee issue in light of the organizational climate and workforce demographics.

The financial employee benefits should be carefully crafted to accommodate the top problems identified and leveraged efficiently using technology.