As a corporate leader, you understand to attract and retain top talent, you must stretch far beyond the salary you pay to key employees. You must also offer competitive benefits like retirement plans, stock awards or tailored perks.
While it is essential to help employees with their retirement planning, for many retirement isn’t their highest priority. More and more organizations find value now in thinking broadly about their employees’ overall financial wellness.
No matter how much money employees earn, they still worry about their finances. On one end, they may struggle to live within a budget. On the other, minimizing taxes takes priority.
According to a 2017 PricewaterhouseCoopers survey, 53 percent of all employees are stressed about their finances. Nearly one in three employees say finances have been a distraction at work.
Almost half of those employees spend three or more hours a week handling their personal finances at work. Plus, stressed employees are also twice as likely to miss work because of their personal financial issues and more inclined to cite health issues caused by financial stress.
So, the more you can help them, the more productive they’ll be for the company.
To compete, companies use compensation and benefits to attract and retain key people. The diagram below outlines a typical compensation plan with salary, bonus, stock awards along with benefits that can enhance the overall package.
Jason Hull in his blog, “5 Reasons HR Directors Should Include Financial Planning in Benefits Packages,” says, “One of the mistakes that I made in determining a benefits package was assuming that if we paid our team members well and gave them good health benefits, they’d be well set up for taking care of themselves financially.”
Many companies see a fine line between work and private life; they consider money issues beyond that line. Pay them well, but let them make their own decision of how to spend their money.
As a CEO of many companies, I understand how companies believe this is the correct approach. However, there is also a fine line between offering financial recommendations and educating and coaching employees to make informed financial decisions.
For most key employees, a large portion of their net-worth is created by the company. You’re providing them with salary, bonuses, 401(k) plan, deferred compensation, life insurance, disability and, in some cases, equity in your company.
If employees make poor decisions with their money, financial issues are destined to follow causing stress and unwanted repercussions on work performance.
A few years ago, a vice president of human resources told me a compelling story. She said one of her company’s Ph.D. computer engineers allowed millions of dollars of stock options lapse. When the company confronted him on why he let this happen, he said, “I didn’t have the money to exercise the options.”
He was brilliant in his field but wasn’t an expert in financial planning. A little knowledge and coaching would have gone a long way here. While an extreme example, many executives do not fully understand the full scope of their corporate benefits. Poor decisions result.
During his most notable monologues, the brilliant British philosopher Alan Watts often asked, “What if money was no object?” Watts would try to encourage people to ignore the trappings of money and instead follow their hearts and passions as if money was, indeed, no object. If they truly committed to that pursuit, he suggested, then the money would come.
However, let’s face it: money matters. It pays the bills and it is how people keep score. After all, everyone thinks about their personal finances when they decide which organization to work for.
Because of all that, money is also a reason why employees leave their jobs. If a new job offers just a small raise, people do not care; if you offer them a significantly higher wage with unique benefits, you will get their attention. And, remember, we are in the midst of fierce competition for top talent.
For financial wellness programs to succeed, they need to do more than merely provide education; they need to affect change and improvement, and result in employees taking appropriate actions that lead to financial success.
My Financial Coach’s approach to employee financial wellness seeks to engage employees through every stage of their financial lives, as we guide them towards positive action, whether saving for a house, a car, college, or retirement.
There’s no argument that companies benefit from the work of financially sound employees. For example, an effectively designed employee financial wellness program can help employers:
How does your company define financial wellness? And what are you doing to create a financial wellness mentality in your workforce? The stakes are high. The benefits are many.