Financial Wellness Programs Benefit both Employers and Employees

While employee wellness programs focused on physical health remain the most popular wellness offerings, organizations are recognizing the interrelationship between the physical, financial, work, and well-being components of employees’ lives. A study by the Society for Human Resource Management (SHRM) found that money is the number one cause of stress among workers and that stress attributable to financial matters exacerbates physical symptoms.

More than half of U.S. workers are financially unhealthy. How can you tell?  Look at benefits data such as health benefits claims for stress-related illnesses, attendance, and participation rates in retirement and risk protection plans and payroll data, such as garnishments, payroll advances, and requests for 401k hardship withdrawals. From a productivity standpoint,  financially unhealthy workers are nearly five times more likely to be distracted by finances at work, three times more likely to spend 20+ hours per month dealing with financial matters while at work, twice as likely to miss work due to personal financial issues, and more inclined to cite health issues caused by financial stress than workers who are not financially stressed.

What is financial wellness? The Consumer Financial Protection Bureau (CFPB) defines it as a state of being where workers:

  • Have control over day-to-day, month-to-month finances;
  • Have the capacity to absorb a financial shock;
  • Are on track to meet financial goals; and
  • Have the financial freedom to make the choices that allow you to enjoy life.

Beyond improving employee wellness and increasing productivity, consider these reasons to encourage financial wellness:

  • Fifty-three percent of U.S. companies offer financial wellness programs today compared to just 24 percent in 2015, according to Bank of America’s annual 2019 Workplace Benefits Report.
  • Student loan debt and rapidly increasing housing costs increase financial pressures
  • Your organization and your employees get the best value from your existing employer-provided benefits. Increasing participation in health savings accounts (HSAs), flexible spending accounts (FSAs) and 401(k) plans have mutual benefits.

Additionally, the workplace is where people make some crucial financial decisions. At work, we can decide how much to save for retirement, whether and how to secure health and life insurance, and whether to set aside funds to meet childcare and medical expenses through specialized savings accounts.

There are a few options to consider when adding a financial component to your employee wellness programs:

  • Existing vendors: Your current health insurance or wellness program provider may have a budget set aside for third-party wellness initiatives. Check with your insurance broker, Employee Assistance Program, 401k administrator, and health insurance provider.
  • Financial wellness vendors. There are for-profit and nonprofit options. Many companies who describe themselves as financial wellness providers are financial service companies whose revenue comes from the sale of financial products and services. Consider nonprofit and government agencies committed to improving the financial wellness of workers.
  • An internal option is re-designing HR processes to improve employees’ financial health.

Beyond its role as a primary source of wages and benefits, the workplace also plays a role in training workers, exposing them to new ideas, and setting social norms. Human Resource professionals are at the forefront of designing and directing processes in which workers make many choices that have broad implications for their financial health. These processes cover the gamut of payroll and HR benefits such as tax withholdings, paycheck preferences, retirement benefit enrollment, and decision-making, rights to privacy, mental and physical health benefits, and much more.

Research by behavioral scientists like Nobel Prize winner Richard Thaler showed that people are not naturally inclined to prioritize their future retirement over their current spending, but that well-designed “nudges” are powerful tools to help employees save. Employers and U.S. policymakers heeded Thaler’s call to change HR processes to help employees save for retirement, most notably through the 2006 Pensions Reform Act, which authorized auto-enrollment and auto-escalation of employees’ retirement contribution amounts over time. As a result, millions of Americans are now automatically saving for retirement. The nonprofit Neighborhood Trust offers the HR Design Toolkit,  a set of tools and resources to support employers willing to implement business processes or systems change to improve the financial health of their employees.

Ultimately, adding financial wellness programs benefits employers and employees through improving employee wellbeing, productivity, absenteeism, and the employer value proposition.