As of 2022, approximately 27% of companies are offering comprehensive financial wellness programs for employees, a number that continues to rise year over year.
When you consider the fact that money is the number one cause of stress in America, and add the realities of the economic shift we’ve seen this past year (image below), it’s no surprise that companies are stepping in to offer helpful resources.
Like any worthwhile, comprehensive program, implementing a financial wellbeing strategy will incur a cost to the business. At first glance, financial wellness is often categorized with the “hard-to-rationalize-but-seems-like-a-good-thing-to-do” bucket alongside office snacks and unlimited PTO.
That, however, is a short-sided thought. It certainly will bring goodwill to your employees, but it’s not just an altruistic move by the company. More and more studies are proving that financial wellbeing at work provides provides both goodwill AND a tangible return on investment for your company.
So, what is the importance of financial wellness in the workplace and how does it positively affect both your people and your business? Here are 6 direct lines to an improved bottom line:
Turnover cost: Financially stressed employees actively leave jobs for slightly better pay in hopes that their financial lives will change. For lower-paying jobs, something as simple as $1 more per hour can entice a change. Replacing employees is time-consuming and costly. When you consider the lost production, recruiting, onboarding, and training time, replacing a general salaried or technical position will cost somewhere between 100-200% of their salary! By this math, retaining a single employee - that has gained financial stability and confidence in their current role and will no longer reactively change jobs for slightly more pay - makes the company-wide investment worthwhile.
On-time retirements: When employees stay with companies into their late 60’s and early 70’s, the factors of higher pay and added healthcare costs add up for the company. When quantified, an on-time retirement saves a company approximately $50,000 in higher wage and added healthcare costs.
Lost productivity: Studies have found financially stressed employees lose at least 1 full additional week of productivity as work per year compared to non-stressed peers. Why? They’re using work time to worry about and/or do something about their personal financial situation, such as seeking a short-term personal loan, looking into ways to improve their credit, or figuring out the best option for consolidating debt.
Your HR / Admin team’s time: There are 2 primary factors that feed into how much time can be saved for this team if your employees have access to resources.
- First, the HR team is actively receiving requests for wage garnishments, payroll advances, 401(k) loans, and more. Reducing those requests gives them more time to complete more valuable tasks.
- Also, offering financial wellbeing at work provides your employees a trusted, reputable resource to answer questions that otherwise go to HR. For example, during open enrollment, employees have questions related to insurance choices and 401(k) elections. A good financial wellness vendor will collect your company’s benefits information, compare it to the employee’s personal financial life, and provide a data-backed recommendation. This way, your employee gets a professional and personalized answer, AND your HR team gets their time back.
Reduced company payroll taxes: As more employees use tax-advantaged benefits - like 401(k)’s and HSA’s - your company’s payroll taxes are reduced. Part of the holistic financial wellbeing strategy with employees is around securing their futures, which means finding extra money to put away in these tax-advantaged plans. For simple math, let’s take a 250-person company with an average salary of $80,000 ($20M in payroll annually). If you’re able to get just 15% of your employees to add 3% to these plans, that’s a $90,000 difference in taxable payroll expense.
Financially stressed employees have more healthcare costs: According to EBN, employees that use financial wellness programs saw healthcare costs decrease by 4.5%. On the other hand, those not using financial assistance saw a 19.4% increase in healthcare costs.
Investing in financial wellbeing initiatives for your employees can yield a significant return on investment (ROI) for your organization. Incorporating comprehensive financial wellness activities into your benefits program can directly enhance employees' financial knowledge, encourage responsible financial behavior, and reduce their financial stress, leading to increased productivity and engagement in the workplace. By providing access to expert financial wellbeing tips, you help empower your employees to make informed decisions about their finances, which will reduce absenteeism and foster a more focused and dedicated workforce.