For many employees, the COVID-19 pandemic has revealed how fragile their financial security is. A recent survey from the National Endowment for Financial Education found that nearly 9 in 10 (88%) Americans said that the COVID-19 crisis is causing stress on their personal finances. For employees, the pandemic has not only heightened financial stress but also shown a lack of preparedness for economic hardship that highlights a greater need for comprehensive financial wellness programs from employers.
To put it simply, work and employee’s relationships with their employer have fundamentally changed in 2020. Employees’ needs and wants have shifted to adapt to the new normal of working from home. Home life and work-life have become one, and with that comes both personal and financial complications.
The pandemic has highlighted a need for benefits that can adapt to the changing times and help employees better manage work and life. Even before the pandemic, the desire for financial wellness programs was significant. An AllianceBernstein survey of plan sponsors and participants conducted before the pandemic found that financial wellness programs were gaining ground.
When asked what the impact of a financial wellness program was, 51% of employees said they are more engaged with their company, 40% said they are more productive and focused, and 35% said they were less stressed.
A recent SoFi at Work survey found that nearly 60% of respondents feel it is more important now that employers offer financial wellness benefits due to the COVID-19 pandemic. 53% of respondents said they would feel less stressed about their overall financial situation if they had financial well-being benefits. These benefits include 401(k) retirement plans with or without a match, student loan repayment assistance, 529 College Savings plans, access to financial counseling, and more.
For employers, the impact of a financial wellness benefits program on their workforce now could be an invaluable resource to their employees, as well as a compelling retention and recruitment tool.
The impact of financial wellness benefits
Financial stress is having a negative effect on employee productivity, engagement, and mental health. Paying for an unexpected hardship, saving for major life milestones, and saving for retirement are just some of the top sources of emotional stress for employees, as cited in the SoFi at Work survey. Employees are increasingly looking to their employers to help and are seeking guidance on how to manage their finances and improve their overall financial health.
With access to a holistic financial wellness benefits program, employers have the opportunity to improve their employees’ lives while also helping them boost their financial literacy and get one step closer to achieving their financial goals.
Here are several ways in which financial wellness benefits can help today’s workforce in the midst of a global pandemic:
1. Boost employee engagement. A recent PwC survey found that when asked what causes them the most stress, more employees cite financial matters than any other life stressor combined, and 50% of the stressed employees said finances have been a distraction at work. The SoFi at Work survey found that nearly 50% of respondents would be more committed to staying with their employer for a longer period of time if their employer offered financial wellness benefits.
One way for employers to bolster employee engagement, ease their stress, and retain their employees is to provide meaningful employee benefits that help them manage their financial lives. A recent MetLife study on employee benefits trends found that 2 in 3 employees stated they are feeling more stressed than before the COVID-19 pandemic.
The overall sources of stress include work and finances. In order to promote employee well-being, a comprehensive approach to benefits can really make a difference and ultimately help employees feel more valued by their employers.
2. Prepare employees to handle unexpected financial hurdles. A 2019 report by the Federal Reserve showed that 37% of adults could not cover a $400 expense with cash or a cash equivalent, while another 12% of adults said they would be unable to pay the expense by any means. Even before the COVID-19 pandemic, many employees were already experiencing financial insecurity and were not prepared for short-term cash needs.
For employers, there is an opportunity to provide tools and resources to educate employees on the significance of an emergency fund and encourage them to create one. Outside of offering a 401(k) or retirement plan, employers can also begin matching funds or using payroll deductions to motivate employees to create and continually contribute to an emergency fund.
This simple benefit is one that could help employees develop better savings habits and be in a position where they are prepared to tackle an unexpected financial hardship. It’s also a benefit that employees want. When asked if an employer could make a contribution to one of their benefit accounts, respondents in the SoFi at Work survey said that a contribution to their rainy day fund or emergency savings account would have the most significant impact on their personal financial situation.
3. Alleviate employee stress over debt. It is no secret that employees are struggling with debt, whether from student loans, credit cards, mortgages, or auto loans. Total U.S. consumer debt is at $13.86 trillion. There are 45 million borrowers who collectively owe nearly $1.6 trillion in student loan debt in the U.S. and it is now the second highest consumer debt category. For employers who have the means, offering some relief on employees’ student debt repayment could make a dramatic difference in their overall financial well-being.
With the CARES Act passed earlier this year, employers have a chance to make an even greater impact on their employees’ student loans. A provision in the CARES Act allows employers to contribute up to $5,250, tax-free, to employees’ student loans. However, while these benefits could make a significant impact on employees’ student loans, time is also of the essence.
Employers will have to act fast to set up a contribution program before the provision expires at the end of the year. By helping an employee pay off their student loans, an employer is opening up other avenues for the employee to save their money – whether it’s adding to their retirement fund or emergency fund or using the additional savings to save for a major life milestone.
3 actions employers can take to get started
For employers looking for more impactful and meaningful ways to support employees this year, consider implementing a holistic financial wellness program that encompasses both tools,education, and contributions. The following is a list of actions employers can begin to take to make this change:
- It is important to understand the shifting needs of your employees. Consider issuing employee engagement surveys or leveraging talent analytics to see what is most important to your employee base now.
- Conduct focus groups with key talent segments across the company to fully understand the impact of the current benefits package and how their needs may have changed now.
- Re-establish or establish an Employee Value Proposition (EVP) with a strategy that is personalized for where employees are in their career and life and that is flexible enough to change to market conditions and that is cost-effective in delivery.
The COVID-19 pandemic has only escalated the need for financial wellness benefits and for employees who are financially stressed, a program of this type has the ability to transform their financial life and set them up on the path for financial success.
Jennifer Nuckles is the executive vice president of SoFi at Work, an enterprise financial wellness benefits platform with a suite of services, tools, and education that can help employees see a full snapshot of their finances, make smart decisions, and achieve their financial goals.