How Do Finances Impact Employee Wellbeing and Retention?
Employees are stressed and stretched thin when it comes to finances. Here’s how your benefits program can take some of the pressure off of your people.
Record high inflation. Rising interest rates. Lack of job security. If you’ve spent any time watching the news lately, you’ve likely heard these economic factors talked about daily. Nearly 8 in 10 Americans are living paycheck to paycheck, so it’s not surprising that may employees are feeling financially stressed.
But finances are hurting more than just wallets—mental health is also taking a toll. 47% of employees say they would “feel panicked” if facing an unexpected expense, like an ER bill. Gen Z (57%) and Millennials (49%) are the most likely to admit to feeling the pressure, but Gen Z and Boomers aren’t far behind at 44% and 34% respectively.
So you might be asking yourself, “What do benefits have to do with this?”
You might be surprised at just how much your benefits program can do to alleviate the pressure and help employees unlock more of their paychecks.
What does financial stress look like in your employee population?
TL;DR: Everyone is getting hit with financial stress. But it can look different for everyone depending on their needs and circumstances.
Here’s a breakdown from our 2024 Benefits Insights report:
- Employees struggle to save consistently: Over half of all employees (56%) say they only save “sometimes” while 14% say they aren’t saving at all.
- Unexpected expenses would push many into debt: 36%, over a third, of all employees say they would go into debt or otherwise “don’t know” how they would handle a $6,000 ER bill.
- Just the thought of a $6,000 ER bill gives people the ick: Nearly half (47%) say that this unexpected expense makes them feel panicked.
- Gen Z is the most stressed: 57% of Gen Zers say they would feel panicked about an unexpected expense.
- Millennials are the least likely to have an emergency fund: 43% say that they don’t have anything in savings to cover and unexpected expense, despite all generations saying they struggle to save consistently or at all.
A 2023 Metlife report backs this up: Just 55% of employees say that they consider themselves financially healthy and 45% of employees who say they experienced a mental health issue cite financial as one of the primary reasons.
The top benefits programs HR should promote to alleviate financial stress
Benefits are one of the top reasons employees will consider leaving their current workplace, second to pay. Having the right financial wellness benefits in place can help reduce turnover and attract more talent to your organization.
Here are some of the top benefits HR should have in their benefits plan—and be promoting:
- Employer-sponsored retirement plans
One of the best ways that employers can contribute to financial wellbeing is by offering a retirement plan as part of their benefits package. To go the extra mile, employers can offer to match employee contributions to increase the impact of compounding interest.
- Health spending accounts and contributions
Tax-advantage spending accounts can offer more ways for employees to prepare for and off-set stressful health expenses—including ER bills. These accounts are a way employers can empower employees to manage their health and wealth in a better way. When properly designed and administered, these accounts can help minimize an employee’s negative financial impacts, enable better decision-making, and drive more positive outcomes.
- Lifestyle savings or goal accounts
Lifestyle accounts are a great way for employers to support employees with more options to protect—and extend—their paychecks. These accounts sit alongside tax-advantage accounts and offer employers more opportunities to reimburse employees for perks like gym memberships, education, travel, and even home office equipment.
- Student loan assistance
Another way that employers can assist in improving their employee financial standings is by providing assistance for student loans. As many employees are still burdened with the task of paying off their student loans, matching payments can help relieve the stress of debt. 46% of Americans with debt also being diagnosed with a mental health issue, so this benefit can have a big impact on alleviating the burden of debt.
5. EAP programs with financial wellness services
Employee assistance programs (EAPs) have been known to help employees resolve a variety of mental health issues that can affect them in both their home and work lives. In addition to offering traditional EAP programs, many employers are also incorporating financial wellness services into this benefit as well. Some of the services that could be offered with this type of program include household budgeting, debt management, and investing advice for instance.
6. How to promote financial benefits to your employees and drive results
Having the right benefits in place is crucial, but it’s not enough to just offer them—employees need to know they exist. 86% of employees say they’re confused about their benefits and average 70-point gaps exist between the benefits employees want the most versus what they know exists.
The one thing that can really move the needle on engagement? Email communications. In fact, benefits-related emails see a 44% average open rate—this is about double what typical marketing email open rates look like.
But don’t take our word for it—our clients at American Cancer Society have some great tips on how to maximize communications and employee engagement:
“[American Cancer Society] actually does a whole content calendar. We start in November, December, and we kind of roughly sketch out our entire year as part of our wellbeing program…And so I’ll just kind of start dividing it up between the vendors [to plan out our communications]. You’d be surprised at how many vendors are more than happy to provide you stuff if you’re going to advertise their programs. Like it’s wonderful how much stuff that you can get from them to promote your benefits program.”
– Crystal Clark, Senior Program Manager of Benefits at American Cancer Society, a Businessolver client
Financial wellness starts with having access to the right support
While there’s no one size fits all approach to financial wellness benefits, employers need to be taking steps to combat mental health stress related to finances and incorporating them into their benefits strategies moving forward.
Learn more about how financial wellness plays a crucial role in your workplace in this Benefits Pulse podcast episode: Should employers offer financial coaching?
