Employee financial wellness is a concept that Payroll and HR leaders are becoming increasingly concerned with. While this was once a more distant idea that employers weren’t so personally invested in, the pandemic has brought to light how much companies need to be invested in their employees’ financial health and stability in order to be successful. Better attunement to their employees’ financial realities will lead to a stronger sense of trust between employees and employers and has the capability to increase productivity and retention.
Financial worries can be so all-consuming and heavy, demonstrated by the fact that 59% of employees say finances cause most of their stress. Furthermore, 35% of employees are distracted by their finances during work, leading to a loss of engagement and productivity. The financial realities of many American workers are dire. 38% of employees have less than $1,000 set aside for emergencies, meaning that something like a flat tire or an unexpected injury could really put them in a bind. 46% of Americans would describe themselves as financially struggling, with 40% foreseeing long-term financial struggles.
The statistics are even more staggering for young people, women and people of color. The three demographic groups with the highest level of increased debt in 2021 were Latinx individuals (23%), millennials (23%) and women (20%). Women also reported feeling a lack of control over their debt at a much higher rate than men (67% vs. 49%). Women are also almost twice as likely as men (47% vs. 27) to cite a lack of remaining funds after monthly expenses are paid as the main roadblock in achieving their financial goals.
However, there are lots of options for employers who want to help their employees get ahead and become more financially stable. More than 8 in 10 employers now believe that employee financial wellness programs and tools can help make employees more engaged and productive, as well as more satisfied with their jobs and more loyal to their employers. Not only does it help employees transition from financial illness to financial wellness, it also strengthens the employee-employer bond by increasing trust.
In 2020, 72% of employers reported increased usage of financial wellness resources, largely due to financial struggles caused by the pandemic. Because of all the upheavals over the past year, 62% of employers now feel that they’re extremely responsible for their employees’ financial wellness, while only 13% of employers reported feeling that way in 2013. The way the country was absolutely blindsided by the pandemic has opened many employer’s eyes to issues they didn’t see previously.
One proven way to support employee financial wellness is by offering earned wage access. Having access to their earned wages helps employees pay bills on time, avoid late fees, overdraft fees and payday loans, and gives them a safety net for unforeseen and emergency expenses. In fact, this technology has been proven to save employees over $1,205 per year in fees. Because of this, on-demand pay is quickly becoming a highly sought-after benefit, with employees rating it as high as healthcare when evaluating benefits packages.
Not only does having access to their earned wages between paydays better their financial health, it also improves their relationship with their employers. When the employee-employer relationship is repaired, it results in increased employee productivity and lower turnover, since happy employees don’t want to leave their jobs. In fact, 59% of users say on-demand pay motivates them to go to work. Employees also provide better customer service because they have fewer worries and a more positive attitude about their jobs.
Although it may seem that employers shouldn’t be involved in their employees’ finances, being in tune with their needs is beneficial to both parties. By prioritizing their employees’ financial wellness, employers will not only help their workforce, they will also reap benefits for themselves. This is especially true when considering that on-demand pay can be offered, helping them save money as well. By breaking free of the rules of the past and offering benefits that today’s employees value, employers can begin to see unprecedented changes.