Recent research shows that offering financial well-being benefits can lead to a more motivated, engaged, and productive workforce.
By Judith Lamb
Financial stress is higher than ever so it’s no surprise that financial well-being is at an alarming low. An uncertain economic state, inflation, high interest rates, and the increasing cost of living are burdening many people. A PwC survey revealed 57% of employees say finances are the number one cause of stress in their lives. Even for those earning $100,000 or more a year, 47% are financially stressed.
57% of employees say finances are the number one cause of stress in their lives. Source: PwC
At the same time, studies show that many adults have big gaps in their financial knowledge, making it harder for them to manage their finances and stretch their income. With more than 60% of Americans living paycheck to paycheck and nearly two-thirds saying they don’t expect their financial situation to improve in 2024, financial wellness is a key part of mental health for employees as they navigate the everyday stressors of life and attempt to maintain a healthy work-life balance.
Financial stress impacts both mental and physical health, sleep, self-esteem, and relationships at home. All of which can spill over to the workplace.
This opens the door for employers to step in. Data shows that employers offering financial well-being benefits often have a workforce that is more motivated and productive. It helps reduce the number of days employees take off for financial-related issues, and aids in retention of workers. In fact, studies show financially-stressed workers are twice as likely to look for a new job.
HR understands that professionals are not only asking for financial help, but utilizing those services offered to them by their employers. In fact, 68% report using available financial services, up from 51% who said the same more than a decade ago.
91% of employees say they and their coworkers would benefit from employer-led financial education, support, and advice.
Ninety-one percent (91%) of employees say they and their coworkers would benefit from employer-led financial education, support, and advice. The same study revealed a mere 34% of employees currently have access to this type of benefits. Employers can help close this gap and not only help their team with financial stability, but also gain a more productive, engaged, and high-performing workforce.
It’s particularly important for millennials and Gen Z workers: 56% of millennials reported to PwC that their company loyalty is influenced by how much that company cares about their financial health, and when asked, Gen Z workers chose financial security over a promotion.
A financially literate workforce benefits both employers and employees. While a financially stable employee tends to be more motivated and productive, financially stressed employees are almost five times as likely to be distracted at work by personal finance issues. When employees learn how to make smart financial decisions, they are learning improved decision-making skills that they can apply in both their personal and professional lives, including how to spot cost-cutting areas and make sound spending decisions.
Improving Financial Literacy
According to the World Economic Forum only about half of Americans are financially literate. In truth, most adults are left to learn the ins-and-outs of managing finances on their own. Clearly, there’s a major gap in the market for this expertise, and as financial stressors continue to climb, there’s an even greater demand for this type of financial education.
Making the decision to elevate financial literacy at an organization is the most important first step. When it comes to bringing financial education to employees, HR leaders have many options from which to choose.
HR leaders can take ownership of implementing financial literacy programs. With a strategy in place, offering tools such as apps, seminars, and in-person coaching can empower employees to take charge. HR is still there to support workers through it all.
● Give visibility into pay slips and compensation. Financial education starts with offering workers a better understanding of their pay slip. Compensation leaders can help employees better interpret their deductions, rates, and calculations. Employers can also offer counsel on spending and saving. This type of information can reveal hidden costs and help with money management. Education can range from creating budgets to avoiding financial pitfalls to longer-term financial planning that helps plan for retirement.
How and when people can access their compensation and benefits, and having more control over management of these items is all rising in importance. Today’s on-demand culture carries over into the workplace: Employees don’t want to wait to access information, especially when it’s their own.
Instead, they want instant and direct access to this knowledge, at the time of their choosing. Financial apps offer clear, on-demand data on where their earned wages are going, their level of take-home pay, and how to access and direct their income.
● Offer earned wage access (EWA). EWA allows employees access to their wages as they earn them, so it promotes financial stability by helping workers avoid taking out payday loans. It’s an alternative to taking on debt so they don’t need to take out an advance or charge items on credit. It gives employees more control and flexibility to manage their finances.
Employees don’t pay a fee for utilizing EWA. Data of EWA users also show they don’t withdraw their entire paycheck. Instead, they withdraw an average of between $80 and $130, and each transaction is down to the penny, suggesting they are accessing money in an exact amount to cover a particular expense.
EWA is also a selling point for companies looking to recruit and retain talent. Both millennials and Gen Z workers say they deserve instant access to the wages they’ve earned. Workers have instant access to most everything, and their pay should be no exception.
● Support financial planning. In the same PwC survey, 25% of workers say they would like access to unbiased financial counselors and 25% say they’d like identity theft and credit protection.
There are apps that offer one-on-one financial coaching, putting employees in touch with financial advisors without having to go through their HR department. Employees often feel more comfortable not having to disclose financial challenges—or even admitting they just need some help—to their HR team.
A Winning Solution
While there was once a separation between work and personal lives, that line has since blurred. Employees want more from their employers, including resources that will help them with life outside of the office.
Today’s talent has been clear that they are looking for financial wellness benefits. Financial security creates a happier, healthier workforce, and also creates an environment that is more productive, engaged, and high performing. What’s not to love about that?
Judith Lamb is the CHRO at CloudPay.
