To say that Employees are stressed about their finances is an understatement, and their stress could be seriously impacting your customers. According to Time.com, “Americans are more worried about their finances than ever, and it’s interfering with our ability to do our jobs.”
Our world is constantly changing and our future leaders will be from the millennial generation. This demographic was generally born between 1982 and 2004 and, for the most part, does not know what life was like before the Internet. It is expected by 2025, that over 75% of our workforce will be comprised of millennials.
Attracting Millennials to the workplace is usually accomplished by offering up-to-date technology as well as a flexible work environment, as these tend to fulfill their personal and professional needs. Employers have been using a series of voluntary benefits to meet many of these needs, including financial education. However, the challenge with voluntary benefits is that millennials aren’t really excited about them. The irony here is that they are more likely to admit they don’t know about their benefits than other workers, and are open to seeking benefits from entities other than their employers.
As a business owner, there may be times when an employee may turn to you to ask for help, such as an advance in pay, in order to address a particular hardship. Of course you want to help, but lending money to an employee should only be considered after all other options are pursued. There are risks and rewards associated with helping an employee in times of need, many can be associated with being legally compliant, which we share here: “Employer Lending: Exposing Risks and Rewards”
There are other options that are available without becoming a lender – such as a 401(k) loan.
According to SBA.gov, “ If the employee has an account in your 401(k) and the plan allows loans, the business doesn’t have to become a lender. Instead, the employee can borrow up to 50% of his/her account balance (up to a maximum of $50,000). The plan must charge a reasonable rate of interest and repayment must be made in level payments over a period of no more than five years (there’s an exception to this repayment period for loans to buy homes). But caution the employee that if he or she leaves the job—voluntarily or otherwise—the loan must be repaid in full (usually within 30 or 60 days). The failure to do this results in having the outstanding balance treated as a taxable distribution; if the employee is under age 59-1/2, the distribution is taxable and subject to a 10% penalty. Find details about plan loans from the IRS”
Many companies are expanding their voluntary benefit options to include a financial wellness program.
Similar to a physical wellness program, which encourages weight loss and health screenings, most financial wellness programs include a financial education platform that educates employees in money management and encourages their efforts through direct results.
Here are 3 ways that a financial wellness program can improve your business:
When Home Depot’s HR staff noticed employees were struggling with personal finances, they discovered that “only about half of the employees were participating in the company’s direct deposit program and instead, were cashing their paychecks at check-cashing services because they did not have checking accounts. Others were taking out loans against their 401(k) plans, making early withdrawals from their stock purchase plans, or selling their company stock as soon as they purchased it at the end of the year. Home Depot launched a basic financial education program that featured workbooks and videos on topics [such as] developing a savings plan, understanding credit and your credit report, working with checking and savings accounts, and getting a loan.”
Financial struggles continue for millions of working Americans. Even though employers may have a desire to assist employees with a financial wellness program, a lack of knowledge on the effects of financial challenges could adversely impact their efforts.
Understanding how an individual employee’s financial wellness could benefit an organization is vital to the development of a company’s successful Financial Wellness Program.
Businesses count on their employees to effectively and productively service their clientele on a daily basis, regardless of industry, title, or position. However, when an employee is overwhelmed with personal financial matters, their work performance may suffer, adversely affecting your company’s ability to retain its clientele.
While there may be other factors that contributed to the loss of a client, an employee’s distraction over personal financial matters and resulting decline in work performance may have significantly contributed to the situation. According to a study, employees spend at least 3 hours per week, on average, dealing with their finances at work. It could be as simple as making sure a bill is paid on time or something more significant and time-consuming that impacts their work day. The bottom line is that their financial stress can have major, unplanned consequences on your business.
According to the American Psychological Association, stress affects the body in multiple ways.
It has been proven that stress factors, including those caused by financial circumstances, can cause health-related issues such as ulcers, skin conditions, back problems, migraines, depression, anxiety and other mental and physical challenges. In addition, financial stress can result from the amount of debt an individual may have, tuition costs, healthcare expenses, or even how much is being set aside for retirement.
It has been shown that 62% of Americans lose sleep worrying about their finances. In addition to the aforementioned conditions, it may also lead to negative habits such as drinking, smoking, and overeating, etc.
We know that financial wellness programs can help employees, but we also know that they can help a business in their overall success by improving their bottom line.
According to the International Foundation of Employee Benefit Plans 2016 Survey*, over 83% of Public Employers said that financial stress significantly impacted their employees work performance. The loss associated with this level of stress has been tabulated at $5,000 per employee per year**.
Having a comprehensive financial wellness program can help improve a company’s bottom line. In 2014 the CFPB (Consumer Financial Protection Bureau) discovered that for every dollar spent on implementing a financial wellness program, the ROI would be as much as three dollars.
Here are some simple steps to help you measure your employees’ financial wellness:
Many Americans go through school to get their degree and then land a job only to discover that they don’t have the necessary knowledge regarding financial literacy. As a result, these individuals have acquired a significant amount of debt that is a result of their poor fiscal education, and such issues as medical bills and car repairs.
Millions of Americans go through each day assuming that they know how to manage their finances. But studies have shown that almost half of American workers are deep in debt and struggle to save for such things as emergencies, retirement or education. This struggle can be attributed to an absence of understanding in key areas of financial education, which leads to the improper management of their finances.