While most organizations understand that wellness programs lead to more engaged and productive employees, forward-thinking ones understand that Financial wellness must also be considered as part of the package, especially in the middle of a pandemic. Financial wellness is a crucial part of mental and emotional health, and the reality is that lots of people are currently worried about their finances.
A National Endowment for Financial Education study found that 75% of Americans who belong to low- and middle-income households have grown more concerned about their finances since COVID-19 hit, leading them to dip into their retirement and savings funds or incurring debt from loans—even households with emergency cushions have felt the brunt of the pandemic. The pandemic has exacerbated financial stress for many Americans, and this negatively affects their work performance and overall well-being.
Photo by Sharon McCutcheon on Unsplash
What is the cost of employee financial unwellness?
Financial unwellness isn't only hurting employees, it’s also hurting you, the employer. With about one in two U.S. employees worried about money, many suffer from depression, panic attacks, and sleepless nights, which cost billions of dollars in lost productivity at work. A survey by Salary Finance found that American businesses are losing $500 billion per year due to employees' financial stress.
Lost productivity due to financial unwellness costs individual employers on average 11% to 14% of their payroll expense or $2,000 per employee annually. Nationally, lost productivity comprises 2.5% of U.S. GDP and it’s a problem that seems to be getting worse every day. While employers have traditionally disregarded employees' finances, the fact is that companies cannot afford to turn a blind eye to employees’ financial unwellness.
Mental wellness quickly deteriorates if financial solutions aren’t made available, and ignoring the impact of financial problems will only continue the cycle. This means that your employees’ financial problems, by default, become your financial problems. The obvious solution is to pay them more money. More money means no financial problems, right? Unfortunately, it’s not that simple and more money rarely solves financial unwellness.
Why throwing money at the problem is not a solution
The Salary Finance survey we mentioned earlier noted that financial stress isn’t just grouped in the lower-wage worker demographic. Among those surveyed, a fourth earns $160,000 per year and live paycheck to paycheck. Roughly 40% of those earning over $100,000 a year are still considered financially unstable with little to no savings. While it’s confounding that six-figure income earners are still struggling, many with big paychecks have big obligations.
In contrast, many Americans who have a lower wage and have better financial habits have savings accounts and have even paid off houses. Financial unwellness is sometimes due to financial mismanagement, rather than, say an employee not being paid enough. So, what can you do to help ensure that your employees are focused on work rather than their finances on the clock?
The first step is to understand that investing in the financial wellness of your employees can provide a substantial ROI. Many industry leaders now understand the gains that come with improving employee happiness and well-being in the workplace. With employees under more financial stress than ever before, it’s important for you to provide the necessary support network, information as well as training, and guidance about good financial wellness practices.
How can you ensure the financial wellness of your employees?
Pay your employees on time - This may be an obvious solution but many Americans are not paid on-time which can compound their financial stress, especially when bills are due. Understandably, you may be waiting for a client to pay you before you pay your employees but your employees’ paychecks should be your top priority and should be done on time and accurately.
Financial literacy education - Most employees are not natural budgeters and will make spending decisions in the moment, with many quickly falling into debt. Fortune revealed that 89% of Americans believe that financial illiteracy contributes to more social and economic problems, and that it should be a high school graduation requirement. The best thing that you can do now as an employer is to provide your employees with finance and credit coaching to help them become more financially healthy.
Start with encouraging employees to start saving for the long haul through programs like a certificate of deposit (CD) or an employee savings plan (ESP). In Marcus’ guide to CDs, they explain how setting aside money and rendering it inaccessible (for a period of around 6 months to a few years) in a CD could guarantee a higher interest rate than a traditional savings account. This instills financial discipline and long-term thinking in your employees. On the other hand, an ESP allows employees to put in a portion of their wages for a long-term savings account which they can then use for retirement, college funds, or even buying a home. The 401(k) retirement program, arguably the most popular ESP, lets employers match their employees’ contributions by a certain percentage which they can use in retirement.
Help them access a rainy-day fund - To better manage employees' credit scores and actually improve their credit rating, many employers partner with non-predatory, zero-interest loan providers that can help their employees in times of need.
Foster a culture of understanding
These are but a few examples of how you can help your employees improve their financial wellness, and at the same time help your business. Helping others achieve success is one of the traits of a good leader. In our ‘Work (from home) Wellness’ write-up, we noted how staying connected with your team is detrimental for remote work. This means that just because you can’t physically be visible to your team, you’re inaccessible. Encourage participation and sharing thoughts during virtual meetings—and have those regularly too.
With this in mind, by creating a culture of trust, respect, transparency, and emotional safety, you can remove the stigma associated with discussing money matters and build a supportive culture. Start with management and encourage them to speak up should they have financial woes, so they can learn from each other, and help each other open up. Remember, the success of your business depends on your employees. By investing in their well-being, you are investing in the success of your business.
This post first appeared on 4Cs Blog: Employee Surveys And More | Insightlink Communications, please read the originial post: here