HR leaders say providing employees with financial well-being benefits can help alleviate stress and improve productivity, motivation, and morale.
By Maggie Mancini
Financial stress is reaching critical levels for American workers, with three in four employees living paycheck to paycheck, according to research from FinFit. Employees are increasingly stressed about the rising cost of everyday items, as well as insecure about their ability to save for retirement. Financial stress has a significant impact on employees’ mental and physical health, which can affect their productivity, motivation, and morale.
Research from the Financial Health Network shows 70% of Americans are not financially healthy. And, despite 74% of workers saying that financial wellness benefits in the workplace are important, just 28% of organizations provide them.
“Managing personal finances is overwhelming,” says Agata Zasada, SVP of people and culture at ZayZoon. “Data shows 52% of employees stress about their finances daily, which can severely impact their ability to remain productive and engaged in the workplace. When employees are worried about their basic needs, they can’t bring their full authentic selves to work.”
HR teams can help alleviate this stress by investing in programs that equip employees with tools they need to improve their overall financial health, Zasada says.
Impacts of Financial Stress
Employees experiencing financial stress are less productive, less engaged, and more burnt out than other employees. While ensuring fair and adequate compensation is a major way to help employees reduce their financial stress, over 60% of employees feel insecure about their ability to retire comfortably, says Toni Frana, career expert manager at FlexJobs.
Organizations looking to combat these fears could provide resources from financial experts designed to inform employees about retirement and saving strategies, she says.
“Having clear policies communicated and adhered to around compensation will help employees manage their expectations around salary on an annual basis,” Frana says. “Arming employees with information to help them make informed decisions about retirement can help alleviate some of the stress they feel.”
Financial stress is a top concern for American workers and has a major impact on mental health, says Matt Bahl, vice president and workplace market lead at the Financial Health Network. He explains that there is a growing body of evidence showing that individual-level solutions are not the answer to improving financial or mental well-being.
When 81% of employees believe employers should invest in their financial wellness, it’s clear that they trust them to be a strong source of reliable financial information, Zasada says. She explains that HR leaders “should provide clear and concise information about new financial resources that can be shared company-wide or via manager one-on-ones, not dissimilar to how HR operates today with medical insurance benefits or employee assistance programs.”
Effective Benefits
Nearly half of employers believe they are supporting employees’ financial wellness, while only 28% of workers feel the same, according to research from Payroll Integrations.
“Providing financial wellness benefits to employees is a win for both the employer and employee,” Frana says. “If employees have access to various financial wellness benefits, this can reduce the financial stress they feel, which can have positive and far-reaching impacts. An employee who is less stressed will be more productive, feel like they have a better work-life balance, and have an overall higher morale and motivation at work.”
Research from the Financial Health Network has shown this misalignment in perspectives between employers and employees, Bahl says. For financial wellness benefits to have an impact, it’s important that solutions align with and address workers’ needs. Here are some examples of benefit offerings that can have a major impact on financial well-being.
- Solutions that provide direct, material benefits to employees are the most effective. “These would include things like earning a living wage, access to emergency savings, affordable healthcare, broad-based employee ownership programs, and improved opportunities for retirement savings,” Bahl says.
- Retirement funds with matching contributions have a sizable impact on well-being. “With recent report finding 85% of people say inflation has impacted their spending habits, and given that over half of employees are insecure about retirement, a company with a generous 401(k) or simple IRA with matching contributions can impact well-being as it shows employees an easy way to save and have an active retirement plan as a minimum,” Frana says.
- Education benefits are paramount. Frana explains that student loan payment assistance is particularly appealing to employees and can relieve some stress.
- Modern benefits can help provide financial flexibility for employees. Earned wage access (EWA) and emergency savings accounts (ESAs) offer immediate cash flow relief for unexpected expenses, which can help employees make ends meet before pay day, Zasada says. These can also be utilized for financial planning, helping workers budget more effectively and move towards building longer-term savings.
“It’s important to note that when HR leaders understand their employees’ biggest financial stressors, they can provide solutions either as benefits or programs that address their needs and go beyond a standard benefit that just checks a box,” Zasada says.
52% of employees stress about their finances daily, which can severely impact their ability to remain productive and engaged.
Improving Financial Literacy
While financial benefits can be effective at improving employee well-being and reducing long-term stress, financial literacy is another “critical part” of any financial wellness offering, Zasada says. It’s not enough to simply offer benefits—employees need to understand how to leverage those benefits to budget, save, and plan.
“Benefits should be carefully vetted to ensure they also provide financial education tools that will empower employees to make informed financial decisions that ultimately improve their financial health,” Zasada says.
Providing employees with access to financial programs, educational resources, and employer support can help them address financial challenges autonomously and improve their employee experience, she explains.
However, financial literacy alone may not be sufficient to reduce stress or keep employees engaged at work, Bahl says. He explains that financial literacy programs tend to have low engagement rates and may not reach workers who are struggling the most. But that doesn’t mean they’re unnecessary.
“Knowledge is power, and giving employees the opportunity to participate in financial literacy events or initiatives can be empowering for them,” Frana says. “Feeling empowered with good and actionable information allows employees to take action to improve their own financial situation which, in turn, can have a positive effect on their well-being at work and at home.”
Making Wellness Accessible
To steer employees toward financial resources to help ease their stress, HR leaders should work to improve communication and accessibility of existing financial benefits, Frana says. Adding financial tips and other resources to monthly employee newsletters or adding a Slack channel dedicated to financial well-being can help ease stress.
“It starts with understanding what is causing the stress and then implementing solutions that address the cause,” Bahl says. “Employers spend a lot of money on their benefits, and they want people to use them. Making sure you have multiple front doors into your benefits can be an effective way to help maximize the value of your benefits offering.”
