Does your company have an employee financial wellness program?
This seems to be a common question HR managers and company executives hear these days. Interest in these programs is growing. Employers are increasingly aware that employees are struggling financially and need help beyond what traditional benefits like health insurance and retirement benefits can offer. Nearly half of employees are stressed about their finances and a quarter are distracted at work as a result.
It's no wonder many employees are stressed out about money. Almost half of employees don't have enough money in savings to cover 3 months of living expenses should they need it and nearly half say they have a hard time paying their expenses.
Through the Social Policy Institute at Washington University in St. Louis, we've been studying EFWPs for a few years now. Though no standard definition of what an EFWP exists, products and services include financial coaching, digital financial management platforms, small-dollar loans, pay advances, savings programs, and more.
Here are a few key observations from our work thus far:
- The workplace has key advantages for promoting financial well-being. Accessing products and services may be easier through the workplace. For example, an employee with a poor or fair credit score can get a short-term loan through the workplace that they couldn't from a bank in their community. Payroll systems can be leveraged to offer employees loans with payroll-deducted repayments or to help employees save.
- Technology is driving the field, but the human touch is still important. Much of the market activity around EFWPs is from "fin tech" startups which offer everything from medical loans to student loan repayment to easier 401k transfers. Digital platforms and apps can help simplify financial decision-making and make it easier to access financial products, though employees still want financial advice from professionals.
- EFWPs are poor substitutes for good employment practices. Let's say a company gets excited about offering employees pay advances – access to their earned wages before payday so employees can pay important bills on time. But what if the reason employees are struggling to pay bills on time is their work schedules and hence, their paycheck is unpredictable and irregular? Similarly, financial coaches can only do so much for employees whose low pay makes it hard to afford housing in an expensive city.
- Saving is King. I'm hesitant to draw attention to particular products and services, but I can confidently say that anything that helps employees build emergency savings is critical. Having liquid financial assets to pay for a large, irregular expense (think hospital bill), an unexpected event (expensive car repair), or cope with a drop in income has been shown in prior research to lower the risk of experiencing financial hardship, such as being unable to pay rent. Simplest way for companies to help employees save? Offer split direct deposit. Even better: match employees' savings deposits.
Advice for Employers
- Look before you leap. Figure out what your employees' financial challenges are before you consider a financial wellness program. No need to reinvent the wheel or pay a steep management consulting fee - you can use survey items from publicly available sources like the Consumer Financial Protection Bureau's Financial Well-being Scale. Also, consider how you can improve employee financial wellness without a new benefit, such as contributing to employee health and dependent care reimbursement accounts.
- Scrutinize provider claims. There are many start-ups in the financial wellness space clamoring for your attention. This encourages innovation and healthy competition, yet it may also encourage dubious claims about impact. Look for providers whose benefits have been assessed or evaluated by a credible third party.
- Don't expect miracles. Related to #2, be especially wary of claims that a financial wellness benefit will reduce turnover and absenteeism, and boost performance. The research evidence doesn't exist to support these claims and many other factors affect these outcomes. If your concern is turnover, there are probably stronger factors to address than whether you offer an EFWP.
- Ensure equal access. Make sure all your employees can access, use, and benefit from an EFWP. If you bring financial coaches into the workplace, make sure employees working 2nd and 3rd shift have a chance to use this service.
Employee financial wellness programs represent a new generation of employer benefits. These programs address financial challenges that health and retirement benefits don't. But these programs aren't a miracle drug; it's important to first understand your employees' financial challenges and consider other things you can do to improve financial wellness.
Mathieu Despard, PhD
Social Policy Institute, Washington University in St. Louis
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