According to PwC’s 2018 Employee Financial Wellness Study, which tracks the well-being of full-time employed U.S. adults, “close to half [46%] of all employees say they are stressed about their finances.
And when asked what causes them the most stress in their lives, nearly twice as many say financial matters as compared to job stress; in fact, more employees say financial stress than health concerns and relationships combined.”
If half of all employees are stressed about finances, how is it affecting employers and company performance?
Well, you are losing money.
The authors of an excellent article on “The Impact of Financial Stress on Workplace Productivity” calculate that, for a company of 1,000 employees, the total cost of workplace stress, based on the issues above and others not cited here, totals an astounding $5,665,500 per year.
How would you like to apply that sum to the bottom line next year?
The Prudential/PlanSponsor survey stated that 87 percent of respondents do not plan to make any changes to their NQDCPs. Of the few planning a change, most cited additions or enhancements to plan: education and communication programs (52.6%), investment crediting options (42.1%) and distribution options (36.8%).
According to Don Curristan, another EBS managing director, a second factor strongly influences outcomes:
Year after year and across generations, employees consistently define financial wellness as aspirational goals like freedom from stress and financial worry and making choices to enjoy life.
More than half of all employees want to make their own financial decisions, but they do look for someone to validate that decision. Employees want a financial wellness benefit with access to unbiased counselors and help to understand and use their benefits effectively.
Many organizations have done a good job in adding workplace benefits in the form of various supplemental programs like life and disability insurance, long-term care and deferred compensation to fill the gap in corporate benefits programs. Many others have taken the extra step to offer employee education and financial planning.
According to a 2018 Prudential survey “Benefits and Beyond: Employer Perspectives on Financial Wellness,” 83 percent of employers offer financial wellness programs, up 20 percent compared to only two years ago. An additional 14 percent of employers said they plan to offer these programs in the next year or two. Are you among them?
Our survey reveals that employers and employees report higher satisfaction with their benefit plans when financial wellness programs are offered,” said Vishal Jain, financial wellness officer for Prudential’s Workplace Solutions Group. “Employees increasingly look to their employers to help them achieve financial security, and employers are seeking data and insights on how to respond and influence better outcomes.
Each organization’s approach to financial wellness will be unique to its culture, so it is important to view these efforts from two perspectives:
Of course, the workplace is only one part of an individual’s financial wellness ecosystem, but it is a major one. As an employer, you want to strive to understand your employees’ financial stressors and priorities, both at work and at home, before you develop your strategy. Here’s a rough checklist of areas to consider:
From the employee’s viewpoint, he or she may prefer to keep personal circumstances confidential. They hold assets and private goals they may not wish to share with their employer. To accommodate this viewpoint, use independent financial advisors, preferably CERTIFIED FINANCIAL PLANNER™sTM (CFP®s) who advise on a fee-only basis in an environment of confidentiality.
However, the advisors must possess a full understanding of the employee benefit plans to effectively coordinate and integrate with the employee’s personal objectives and assets. Far too many advisors overlook the employer benefit programs in their planning for the individual.
As an example, when evaluating asset allocation, the advisor needs to examine personal assets, the 401(k) and the company’s nonqualified deferred compensation plan, as well as other retirement plans to do accurate modeling. What plan is best to hold what asset? How should distributions be set up?
Consider this example: In planning college cost for the employee’s children, a savvy advisor looks beyond 529 plans to the company’s stock programs or the nonqualified deferred compensation plan to provide those funds. Knowledge of the inner workings of all these plans also assists with tax planning.
I hope I’ve succeeded in persuading you to make one decision this year to improve your profitability— add the right financial wellness program to your employee benefits package.
Your board of directors will value your foresight when you close the fiscal year.