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Why Investing in Your Employees’ Financial Wellness Boosts Your Bottom Line

What if you could solve your turnover, engagement, and customer service issues with your workplace wellness program?

That’s what wellness experts like Steven Van Yoder, co-founder of Returns on Wellbeing Institute (ROWI), are exploring as they research the effects of holistic wellness investments on organizational ROI and VOI. ROWI’s most recent publication, “Workplace Wellness: Best Practices Study 2022,” identifies key issues and recommendations related to employee financial wellness within organizations that are directly linked to successes in attracting, engaging, and retaining employees.

That doesn’t just translate to scheduling financial literacy lunch-and-learns and hoping everything else will fall into place. To make an impact on your employees’ financial wellness and, subsequently, their whole-person well-being, companies must address economic inequities with real solutions based on best practices.

What is Financial Wellness?

According to the Consumer Financial Protection Bureau, financial well-being is defined as “a condition wherein a person can fully meet current and ongoing financial obligations, feel secure in their financial future, and is able to make choices that allow them to enjoy life.”

What does that look like for the average employee?

Employees who experience financial wellness feel they have control over their finances. They can save money for the future and have a cushioned emergency fund. They have enough money to enjoy life, take vacations, and splurge without worrying.

What is Financial Low-Being?

When employees are lacking in financial wellness, they tend to stress about the future and worry that even the smallest, unexpected expenses will derail their lives. They tend to watch every penny and may even struggle to face their financial situation. This is commonly referred to as “financial low-being.”

Assessing the Current State of Financial Wellness

What exactly does financial wellness look like in today’s work environment?

According to TIAA, only 22% of U.S. employees rate their financial wellness as high, with less than 12% of Gen Z workers sharing the same outlook. Willis Towers Watson found that 41% of employees are currently living paycheck-to-paycheck—which is an increase from 38% before the pandemic.

As more and more employees struggle to make ends meet, ROWI’s study affirmed that 73% of Americans attribute finances as their main source of stress.

Financially stressed workers can cost companies dearly in lower productivity, lower engagement, higher absenteeism, and higher turnover. These employees lose over 15 hours of productivity a week, which translates to a $244B impact to U.S. employers each year.

These sobering statistics are echoed in similar reports spanning a variety of industries:

  • Bankrate reports that 51% of Americans have less than three months of expenses saved.
  • According to The Penny Hoarder, 56% of Americans have no budget and don't know how much they spend monthly.
  • 76% of stressed employees say their finances have adversely impacted their productivity.

Why Companies Should Prioritize Financial Wellness for All Employees

When employees are focused on their financial troubles, they tend to neglect almost everything else in their lives.

Financial wellness is the material starting point for all other aspects of wellbeing. Companies that ignore it do so at their employees’ and their own peril.
steven-van-yoder
Steven Van Yoder
Co-Founder of Returns on Wellbeing Insitute

 

Maslow's hierarchy details that when basic needs for shelter, food, and safety are met, people can devote their time and resources to fulfilling higher needs, such as mental health and well-being.

But without a solid foundation of financial security, it’s nearly impossible to meet those higher needs, which can slowly chip away at an individual’s whole-person well-being.

When viewed through the lens of corporate wellness, employees who are experiencing financial low-being are likely not sleeping well, cannot afford services like gym memberships or therapy, and may even self-medicate as a coping mechanism.

Financial Low-Being Jeopardizes Employee Health and Wellness

Price Waterhouse Coopers’ Health and Well-Being Touchstone Survey reports that 49% of financially stressed employees have also experienced severe dips in their mental health over the past year. PwC’s 2022 Employee Financial Wellness Survey corroborates that money problems have impacted everything from physical and mental health to self-esteem in employees.

So why aren’t employees seeking help? Because it’s just too expensive.

The average charge per session with a private therapist is approximately $150. Multiply that by four sessions per month, and the total comes to a considerably larger sum than employees at the low end of the pay scale can afford. In other words, they simply can’t get the help they need.

With data this stark, companies must jump into action to address the financial wellness disparities currently plaguing employee populations. However, in his research, Van Yoder has found that many companies don’t see the connection between their employees’ financial wellness and their wellness programs and benefits, which could be the missing link they need to get ahead.

Connecting Employee Financial Wellness to Corporate Progress

Among the 18 award-winning companies included in ROWI’s study, most recognized financial wellness as a pillar of well-being, but had limited authority or input in setting wages and designing benefits to ensure all employees were paid living wages. What’s more, many had little to no idea how their own pay rates were determined.

And many couldn’t even confirm if their employees were taking home enough pay to meet their basic needs.

“We found that most employers are not paying enough attention to financial wellness. They often claim to be paying market wages or blame inflation or lack of financial literacy for their employees’ financial stresses," says Van Yoder. While practically every company is struggling to fill jobs and retain employees, they don’t see the connection to their pay rates, benefits, or high deductible insurance policies.

But employees are making that connection.

PwC’s Employee Financial Wellness Survey found 38% of financially stressed employees are actively searching for other jobs, and 75% of those employees are looking for companies that “care more about their financial well-being.”

To Van Yoder, the solution is clear. By approaching financial wellness from an employee-centric point-of-view, companies can find solutions that meet employees where they are, which will have tangible benefits on turnover, morale, and productivity.

3 Employee-Centric Best Practices for Financial Wellness

“Your employees are the face and voice of your company. They perform the essential functions to keep your business running. The way they treat your customers, the way they answer the phone, and the way they avoid workers' compensation injuries all correlate to their financial well-being."

Van Yoder’s study asserts that if companies devote time and resources to addressing their employees’ financial wellness, they can see large-scale improvements in company culture, returns on health care investments, and more.

By paying attention to how much employees earn, evaluating financial wellness on a case-by-case basis, and objectively and equitably determining what each employee needs to achieve financial success, employers can help employees take steps to reaching whole-person well-being.

1  Pay Employees a Living Wage

Companies rely on essential workers to keep their businesses running, but they don’t tie compensation to the value their employees deliver.

Is it any wonder so many companies are struggling to fill essential business roles? Van Yoder believes that paying employees a living wage can address this issue, citing national retailer, Costco, as an example.

Case Study: How Costco Cracked the Longevity Code

The retail industry is typically characterized by low wages and a tremendous amount of turnover. But Costco breaks that mold. In fact, the company is known for its remarkably low turnover rate, which has hovered at around 6% for years.

To get to the bottom of its success, Van Yoder conducted a whirlwind tour of Costco locations around the United States, asking employees why it was such a great place to work.

Their collective answer? “Wages and benefits.”

They told him they’ve stayed with the company (some as long as 13 years) because they can determine their own future. One person claimed they started by pushing carts, but eventually made their way up to working in the optometry department.

"This is retail. These are supposed to be bad jobs. The success of companies like Costco who make living wages a centerpiece of their business model made me rethink what's possible and realize financial low-being is a solvable problem,” describes Van Yoder about working with Costco.

Looking further, Van Yoder also discovered that Costco’s price model is determined by its wage structure, rather than vice versa. The company calculates wages based on what its employees need to live and builds their business model around that, knowing it sustains employee loyalty and productivity.

How to Calculate Living Wage

Using a tool like MIT Living Wage Calculator, enter job descriptions by ZIP code to get a full picture of what an employee needs to make per hour. You can also calculate this based on family structure (i.e. single, partnered, partnered with children) to determine what employees will have remaining for savings.

2  Meet Employees Where They Are

Paying a living wage is critical, but it doesn’t look the same for everyone. Companies need to make sure their financial wellness programs meet individual employees where they are.

Before taking any action, companies need to have a comprehensive understanding of their employees’ financial well-being. Here are some questions that can help employers dig deeper and find out what employees really need:

  • Is our company paying a market rate or living wage?
  • Are our employees having to borrow from payday lenders to get by?
  • Do our employees have a sufficient amount of disposable income after their basic needs are met?
  • Are our employees able to build an emergency savings account?

To explore this further within your own organization, the Consumer Financial Protection Bureau offers a Financial Well-Being Questionnaire that lets you assess employee financial wellness on a case-by-case basis.

3  Design Benefits Based on Employee Needs

Van Yoder’s third recommendation is to customize benefit design to give employees the wellness offerings they really need.

Keep in mind that your overall goal is to keep more money in employees’ pockets so they can experience financial fulfillment. In other words, you’re trying to boost their bottom line so they will be more inclined—and more able—to do the great work needed to boost your bottom line.

That means your benefits should be personalized to set your employees up for success. This will look different within each organization, but Van Yoder gave a number of examples he’s seen in his work:

  • Personalize your benefit plans and make sure employees have access to affordable in-network providers.
  • Consider mental health benefits that either pay for multiple sessions or include services such as digital coaching or self-directed CBT.
  • Help employees create emergency funds or offer grants to help workers meet unexpected needs.
  • Offer an employer-sponsored 401(k) with at least minimal company matching funds.
  • Provide access to financial planners and advisers to help employees manage their day-to-day finances, create a budget, and form sustainable spending habits. 
  • Partner with a local credit union to give employees access to reasonable mortgage and loan rates.
  • Curate financial education programs that appeal to a variety of employee populations and that are based on financial wellness assessments.

By implementing these three best practices, companies can begin to realize the benefits of better customer service, heightened employee engagement, and reduced turnover.

“If an employee is just clocking their time because they’re not making enough to live, they may not go the extra mile to provide the level of service your customers expect. By investing in employee financial wellness, companies also invest in their own success.
Steven Van Yoder
Co-Founder of Returns on Wellbeing Insitute

To learn more about financial wellness and the best practices recommended in this blog, reach out to one of our experienced Wellness Consultants. At WellRight, we’re here to help.

 

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