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Are Employers Responsible for Workers’ Financial Wellness?

By: Richard Carrano
Last updated 5/12/2014

Employers are starting to realize that it’s not just physical health that impacts employees but their financial health as well.  Most employers understand that wellness programs can improve employees’ health and may even help the employer’s bottom line. The same applies to employees’ financial health. Employees who are financially sound and without significant money worries at home are happier and more focused on the job. 

Employees Are Anxious About Finances and Worry About Them on the Job

How much of a problem is employees’ financial stress? Today’s adult workforce is awash with financially fragile employees, those living from paycheck to paycheck and with little or no savings and credit. Many of these employees simply don’t know how to manage their money, and when faced with an emergency, unexpected expense, or major purchase, they often arrive at decisions that only make their financial situations worse―ultimately affecting their on-the-job performance and, consequently, the employers’ bottom line.  

Employees are anxious about their finances and worry about them almost daily. They are feeling the pain of financial insecurity and the effect it has on their lives. PwC’s 2014 Employee Financial Wellness Survey reported that cash flow continues to drive employees’ financial concerns with anxieties about insufficient emergency savings for unexpected expenses (50%), delayed retirement (42%), and not being able to meet monthly expenses (21% percent), among the top issues.

In a national Harris Interactive® and Purchasing Power survey conducted last year, 41%  of  responding employees indicated they still have at least a fair amount of financial stress (20% said that they had quite a bit or a great deal of stress), even though nearly half felt they were better off financially than they were the prior year. But 44% don’t have at least $2,000 in emergency savings for unexpected expenses that occur.

Employees admit that financial-related stress distracts them at work. The same study showed just how much:

  • 44% of respondents indicated they worried about their personal finance during work hours; and
  • 46% of respondents said that on the average they spent two to three hours per week at work dealing with personal finances.

In addition to lost productivity, stress over money was said to take both a mental and physical toll on workers, impacting health-related costs. Among them:

  • Twofold greater risk of heart attacks;
  • Three times more likely to have ulcers or digestive tract issues;
  • 44% had migraines; and
  • 500% saw increases in anxiety and depression.

Your Employees’ Financial Problems Are Your Problems, Too

Without a doubt, employees’ financial problems can quickly become employers’ problems as well. That’s why companies should have a stronger hand in helping their employees find their financial footing. In fact, a recent survey shows that because of the economy, almost half of employees are counting on employers’ benefits programs to help with their financial protection needs.

A growing number of progressive companies have started to recognize the potential upside to addressing the “9 to 5” impact of their employees’ financial stress by offering financial wellness programs and benefits at the workplace. These organizations have discovered that they can build employees’ loyalty, increase their productivity, and improve job satisfaction by providing programs that help them achieve financial wellness. Many have discovered new, no-cost, and easy-to-implement options to help employees develop healthier relationships with money. These programs can deliver significant value for both businesses and their workers.

Offering financial education and financial wellness programs at work are aimed at helping employees change their money behavior and increase their financial literacy. Many of those include on-site money management and financial planning seminars.  However, all this type of programming goes for naught if employees don’t have cash or have viable credit or financing options readily available to them.

Time to Change the Paradigm of Consumer Credit

Despite having financial wellness benefits and trying to make improvements, the reality is that for many employees, paying cash is not an option when it comes to making purchases. While 17% of Americans can lean on a family member or friend for financial assistance, the remainder simply don’t have a solution for unplanned (or even planned) circumstances such as divorce, medical issues, appliance replacement, college, a new baby, etc. Their choices? The not-so-very-nice world of consumer financing runs the gamut from credit cards―if they can get one―with 24.9% annual percentage rates (APR) to rent-to-own with 150-200% APR to payday loans with 300-400% APR to overdraft fees on their checking accounts at as much as 4800% APR.

For every dollar employees try to finance to make purchases, they often find themselves facing high interest and finance charges, as well as the risk of incurring late fees and other penalties, which, in turn, forces them deeper and deeper into debt. 

Believe it or not, employers can help change today’s paradigm of consumer credit by providing reasonable financing options in the workplace. Low-cost, short-term installment loans or an employee purchase program as a voluntary benefit through payroll deduction can provide much-needed solutions.
 
An employee purchase program, for example, promotes disciplined purchasing through manageable payments; a 12-month payment term and pre-set spending limits and controls to prevent over-spending. For the employee, there is no down payment or ballooning interest, no late fees, and no additional fees beyond the all-inclusive price. Today’s industry-leading employee purchase programs allow employees to obtain computers, electronics, furniture, appliances, educational services, and travel packages.

A nationwide survey of those who participate in employee purchase programs found that the typical employee using it is a 35 to 44 year-old married woman with at least one child in the household and earning a mid-income.   This profile shares similarities with the demographic group most vulnerable to financial stress.

Financial Wellness: The Next Evolution of Employee Assistance Programs

When employers help workers with their financial wellness, it pays off. Employees experience better financial well-being and are less stressed. For employers, the results are productive workers who are engaged and empowered along with an enhanced bottom line.

Helping employees achieve financial wellness may very well be the next evolution in Employee Assistance Programs (EAPs). But companies need to understand that financial wellness involves more than just retirement programs. Employers should consider offering a comprehensive program package that includes access to information and seminars on budgeting, money management, retirement, and financial planning as well as voluntary benefits such as employee purchase programs and financial counseling services. We can work to build financial literacy in employees all we want, but without providing them with practical financing options, the cycle of debt will only continue.

[1] MetLife 2012,10th Annual Employee Benefits Survey.

[11] http://www.pfeef.org/research/Financial-Wellness-and-Health-Care-Costs.pdf

[111] Harris Interactive and Purchasing Power survey, 2012.