Should Businesses Help Employees With Personal Finances?

Financial wellness programming is the newest perk employees look for when considering a new position or retaining their current job. Many companies are looking at financial wellness packages to entice and retain workers, but these plans benefit businesses as well. Employees are better able to focus on work when they’re less stressed about their finances. When they’re retirement-ready, they keep the lines of promotion open.

When considering financial wellness plans for your staffers, it’s important to look at how they benefit employees and the organization. Many businesses start with the basics then build their programs based on usage and demand. However you initiate the programming, look for offerings that address the most common needs and how they can be managed.

How important is financial wellness programming?

PwC’s 2021 Employee Financial Wellness Survey polled 1,600 employed United States adults. The majority admit financial stress increased since the start of the pandemic. Overall 63% agree their stress has increased — with millennials at 72% and Baby Boomers at 46%. Of those respondents, 45% admitted financial stress was a distraction for them at work. When employees are worried about how they’re going to pay their bills or manage their financial security, they’re not engaged. For business, providing support and advice can mean talent gets back on the performance track.

Financial wellness support is programming that pays. PwC found 88% of staff used the financial wellness tools their company had to offer in 2021. Of all the benefits organizations offer, it’s likely that only healthcare coverage is more used by staff members. The survey also found 72% of workers would be attracted to another company that provided better financial assistance than their current employer.

One study illustrates just how valuable the benefit is: 68% of workers said they would rather have financial wellness benefits than an extra week of vacation per year. Employees are looking for help from their organization: in fact, 65% of Gen Z workers believe their employers have a responsibility to help them improve and maintain their financial wellness. Understanding how valuable the benefit is to employees, and how frequently it’s utilized, business leaders who want to attract and retain talent should look to add wellness programming as quickly as possible.

Overall 63% agree their stress has increased — with millennials at 72% and Baby Boomers at 46%. Of those respondents, 45% admitted financial stress was a distraction for them at work.

What are financial wellness benefits?

Financial wellness programs range from the most basic 401(k) investment plans to complex budgetary assistance. Businesses can outsource much of their financial wellness programing to third party providers or to companies they already do business with.

Start with the basics and build: a priority for business should be to get workers to understand they can control their finances today and for the future.

Retirement planning

Workers may be fresh out of college, but one day they will want to retire financially secure. Promoting and enrolling employees in 401(k) retirement plans is good for them and for business. Employers who start a 401(k) plan in their organization are eligible for tax credits: as they deduct and match contributions to employee plans, they realize payroll tax savings. These programs are a win/win for business and staff.

Educational benefits

Tuition reimbursement is one of the most common financial program businesses offer. These help workers grow professionally and financially. Another education benefit is helping employees invest in 529 plans to plan for their children’s college tuition. Many companies match 529 plan contributions for their employees.

Student loan debt repayment programming is a highly sought-after benefit as millions of Americans struggle to meet their educational obligations. Companies are getting creative when it comes to student loan debt assistance. One organization announced it would allow employees to convert unused paid time off into payments toward their student loan debt. Other organizations offer employees an option to leverage bonuses or rewards to pay down their obligation.

HSAs and FSAs

Employers should widely promote health spending and flexible spending accounts to their staff members. These accounts allow workers to set aside pre-tax dollars (beneficial for them and employers) for common medical and childcare expenses. Work with your staff members to determine how much they should set aside in the account(s) and how to get reimbursements throughout the year.

Workplace banking services

Organizations can create workplace banking programs, from the most basic direct deposit options to ones more complex. Working with a local institution or a bank of their choice, employees can voluntarily have their paycheck deposited directly into a checking account.

For the millions of Americans who pay a fee to cash their paycheck, these services can represent significant savings. Banks provide workers with ATM cards or checkbooks to access their funds. Businesses can encourage employees to add a savings account and allocate a small portion of their weekly pay into the second, rainy-day account. If employees save as little as $10 per week (often equivalent  or less than check-cashing fees) they can have saved over $500 per year.

Emergency funds

For many employees, a financial emergency means taking out a high-interest payday loan or running up credit card debt. Offering emergency funds between paychecks is gaining momentum. These allow employees to take an advance on their earnings so far through the pay period (or more) so they can meet their obligations. Some companies use third-party providers to give employees access to their funds — others manage the function in house.

Financial guidance programs

You can start with general financial education workshops that give employees an overview of how they can manage their earnings and expenditures.

These benefits include everything — from budgeting, saving, debt and credit management — to assist employees’ immediate need. They also look at long-range planning, like investments, wealth management, and estate planning. Work with existing vendors (like your 401(k) provider), local investment planners, and nonprofits to bring these services to your organization and employees.

You can start with general financial education workshops that give employees an overview of how they can manage their earnings and expenditures. Move from these to specialized classes that cover budgeting, debt reduction, credit scores and more. The more in-depth offerings you can provide, the higher their financial IQ.

There are online services available as well. Some are low cost; others require an employee or employer contribution. Many offer workshops and instruction on how to develop a budget, plan to buy a home, even how to navigate FAFSA that helps parents leverage government aid for their college-bound children.

Look for programs that:

• Analyze employee’s current financial situation
• Set goals for the future (retirement, home purchases, children’s education)
• Help set a family or personal budget
• Educate employees about credit
• Help employees make smarter purchases (like not stopping for a costly latte every morning) or avoiding non-essentials
• Provide confidential counseling‍

Advanced financial planning

There are also services available that address complex employee needs, like medical and debt negotiation and settlement. If you’re recommending or providing credit counseling or debt management services, make sure vendors are licensed 501(c)(3) non-profit organizations and members of the Better Business Bureau in your area.

Best for business and workers

Offering financial wellness services to employees is strong attraction and retention tool but it pays dividends for business as well. The American Psychological Association reports up to 95% of doctor visits are due to money-related stress. They also found employees who worried about money take off 2 times more days per year than their unstressed colleagues. In addition to healthcare cost savings and reduced absenteeism, many businesses can also see a reduction in employee theft.

You can start your employees on the road to financial wellness with the most basic programs, like direct deposit or healthcare/childcare savings. Keep the momentum growing with more advanced offerings and services to grow their financial IQ. As they benefit from the programs you offer, you’ll see higher retention, engagement, and productivity.