For workers in many industries today, a generous array of employee benefits seems par for the course. Especially for young Americans, benefits that cover medical, dental, vision, and even mental healthcare are so ubiquitous that it can be easy to forget why they exist in the first place.
Take healthcare for example. Prior to the 1930s, American workers were on their own when it came to insurance. It wasn’t until 1942, when the newly passed Stabilization Act limited employers’ abilities to raise wages, that companies began to offer health benefits as a way to enhance compensation. A 2018 survey showed that 56% of employees say the quality of health coverage is a key factor in deciding to stay at their job; 46% say it factored heavily in their decision to take the job in the first place.
A similar story unfolded in the 1970s around retirement benefits. The 401(k) plan is a byproduct of the Revenue Act of 1978 which gave employees a tax-free way to defer compensation. Conveniently, it also let employers help workers plan for retirement in a way that was far cheaper than offering pensions. Today, companies with strong 401(k) participation can see up to 80% higher profitability.
The common thread here is that giving employees what they want pays off: 96% of employees who are happy with their benefits are also happy with their jobs. And when companies find good ROI on their benefits initiatives, those returns often show up in the form of improved productivity and morale. The bottom line is that happy, healthy employees are better for business. But there’s a benefit that can make or break overall employee wellness that many employers have yet to adopt: financial wellness.
Plenty of data shows that employees favor companies that offer more meaningful, attractive benefits. Smart employers know this, and it’s leading to a shifting benefits landscape. For example, while about 49% of the country gets health insurance from their jobs, 57% of employers recently said they plan to increase focus on mental and behavioral healthcare spending in the coming years. This is, in part, because mental health — including issues around depression and anxiety — is becoming less stigmatized in our country. Increasingly, Americans are viewing mental healthcare at the same level of importance as physical healthcare in terms of leading happy, healthy lives. As a result, it benefits employers to consider offering it.
But if the goal of employers is to give employees what they’re asking for, in an attempt to increase wellness and satisfaction — thereby increasing productivity and profits — there’s a large piece of the puzzle missing. That piece is financial wellness. This is because when employees are financially stressed, that stress can undercut all the physical and mental wellness employers invest in.
Northwestern Mutual and the American Psychological Association both report that money is the top source of stress in our country. Americans’ household finances cause them more stress than work, relationships, or even their physical health. And that stress spills over into work: PwC found that 67% of workers report struggling with financial stress, which means over two-thirds of our working population is susceptible to things like migraines, depression, and anxiety.
Workers are spending three or more hours per week focusing on financial issues instead of their jobs. Of employees who report being stressed by finances, 12% miss work due to those problems, and 31% feel that their productivity is affected. PwC estimates that for a company with 10,000 workers, all these issues related to financial stress can cost up to $3.3 million in a single year.
These problems persist despite the presence of plans and services meant to help employees with finances. Take 401(k) plans for example. They’re a great thing to offer; beneficial to employees as well as businesses. But they fail to help employees who are struggling in real time to pay bills and make ends meet. Given that nearly 55% of Americans are living paycheck to paycheck, that’s a lot of people who can’t afford to save for their futures — or are taking loans out against what they’ve already saved.
Studies show that more than 80% of employees say they would participate in a financial wellness program if it were offered at work. At its core, financial wellness fits perfectly into that sweet spot of employer-sponsored benefits: It’s something employees are asking for, and not only will it lower stress and improve productivity, but it’ll enhance returns on benefits employers are already investing in: namely physical and mental healthcare.
There are lots of solutions out there that claim to address employee financial stress. But it takes the right kind of financial wellness program to provide immediate help as well as address root problems, thereby helping workers make progress. Once employees can manage their debt, build savings, and lower stress, that’s when progress can take place.
Learn how to plan for and implement financial wellness solutions. Download our latest e-book: A Guide to Financial Wellness: The Employer’s Handbook for Understanding On-Demand Pay and Financial Wellness Benefits
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