Even while unemployment in the US is at a record low in 2019,
67% (an all-time high) of the country's employees reported that they were financially stressed.
Could there possibly be a better indicator of how 'being employed' is just not enough? Time and again, employee financial wellbeing is found to be strongly correlated with a firm's performance, and yet, scores of organizations fail to get their basic employee financial benefits right. Furthermore, employee financial wellness and employee benefits are critical - while evaluating job opportunities.
Why financial wellness is a must-have employee benefit? The 'employee wellness' focus is due to get more critical in 2020, based on the business roundtable that was held by nearly 200 CEOs of the world's best brands. They declared - indicating a paradigm shift in corporate priorities -that shareholders were no longer the focus of companies; instead, their employees were.
Many employers fear the high cost-barriers to offer financial wellness programs. What they probably are not aware of is that new-age financial offerings have made these programs economic. Technology enables better flexibility, options, cost-benefit, and easy availing of these employee benefits - helping better satisfaction. Employers can bundle their financial wellness offerings even with financial content tools, financial wellness calculators, and financial advice - at almost zero additional costs.
Before structuring a financial benefits program, it is first essential to understand the anatomy of financial issues of an average employee, as given in the PWC Employee Financial Wellness Survey conducted in 2019. This survey studied 1,686 full-time employed adults with representation from across the Gen Z, Millennial, Gen X, and Baby Boomer generations.
over one-fifth of adults had major, unexpected medical bills to pay, with a median expense of $1,200.
-The Fed (2017)
The inability to save sufficiently is one of the top problems faced by employees and is associated with insufficient cash flows and mismanaged debts. The PWC 2019 Employee Financial Wellness Survey finds that meeting even small, unexpected expenses becomes challenging for 62% of the Millenials. The survey further uncovers that compensations tend to not keep up with the surging cost of living and that covering even everyday expenses is a struggle. Accumulated debts are another critical issue, owing to credit card penalties and student loans.
$112,300: The size of the average 401(k) balance in the fourth quarter of 2019.
Employees end up saving less and thus are more likely to raid retirement plans before retirement.
80% of US workers expect to work even after retirement because they project themselves being financially insufficient shortly. Traditional retirement planning programs fall short of addressing these newer expense trends and do not address factors that could cause employee stress.
Lack of sufficient financial awareness training and support for employees make them myopic of their future finances. For instance, only 43% of the Baby Boomers due to retire in the next five years have estimated how much they would spend during retirement. The inability to look into future expenses contributes heavily to the financial stress that impacts work productivity.
Overall family spends have increased because many employees have both dependent children and parents. Nearly half of the employees with adult children surveyed in the PwC study, provide them with financial support. In a way to address this problem, employers should plan benefits around the employees' family spends as a whole.
In the USA alone, student loans have reached a record of $1.6 Trillion.
The student loan predicament is here to stay. Almost 50% of millennial have at least one student loan. Even 10% of Baby Boomers still have a student loan. 80% of the millennial claim that these loans take the rest of their financial plans off-track. A few employers like Staples and PricewaterhouseCoopers have taken up student loan repayments - to reduce this debt burden on their employees.
Many organizations efficiently rode the wave of newer financial offerings that gives maximum benefits to both the employer and employees without breaking the bank. Based on trend studies of Glassdoor and SHRM, the following is the list of top financial benefits for 2020
41% of employees ranked bonuses as their most preferred holiday perk.
Bonuses are transforming to become 'strategic' from being just 'cash payouts'. Instead of cash, 63% of employers offer service anniversary awards, 51% offer employee referral bonuses, and 48% offer spot bonuses, according to this SHRM study. Experience bonuses are also on the rise - that offer trips or events to employees that they might otherwise not splurge on - like a concert or tickets to a tournament.
78% of workers with student loan debt want their workplace to offer student loan benefits.
With student loans being a rising financial issue with the new generation of employees, employers use third-party student loan repayment plans to help with repayment of debts. These repayment agreements come with the employees agreeing to stay back for a fixed number of years after the loan repayment. Student loan repayment offers increased by 4% in 2019- according to SHRM's annual survey of employers.
Looking beyond 401(k) opt-ins, employers need to provide personalized advice and financial benefit offerings for their employees. SmartDollar is a financial wellness program in Tennessee that provides access to information and financial advice tailored to the individual's situation and goals. Additionally, employees are offered retirement planning and investment advice online or one-on-one. There are dedicated online financial consulting services like Funds Tiger that offer on-going credit score consulting and financial health checks. Service providers like 7Prosper offer financial planning and consulting on investments, financial goals, portfolio management, debt management, insurance, and taxes.
65% of workers think they’d be more productive working at home than in the office
For new parents, caretakers or employees facing personal emergencies– genuine offerings of paid time off and remote working options save them considerable sums of money and resultantly, better financial stability. Many companies are joining the remote working provision bandwagon - probably why offerings on paid leaves have increased by 3% and telecommuting increased by 5% in 2019. Companies are also increasingly giving paid time off (up by 62%), personal leaves (up by 5%), parental leaves, and family leaves.
Assistance with short-term financial issues helps employees meet ends. Employees are living paycheck-to-paycheck benefits significantly from low-interest installment loans and credit that help employees avoid payday loans, credit card overdue, and emergency cash crunches. Zest Money, for instance, offers zero cost EMIs for employees to avail. Similarly, Avail Finance offers micro ticket sized loans that can be avail right from the employee's smartphones.
Over the past few years, organizations have continually improved their contributions to retirement funds and the adoption of retirement plans. These efforts are projected to grow in the coming years - helping employees save a larger share of their salaries. Traditional and Roth 401Ks are on the rise as opposed to custom company plans and SERPs. In other words, companies find more benefit in government-managed pension funds than custom managed ones. Employers tie-up with investment firms like Orowealth that offer investment advice at zero commission and Zerodha that offer online stockbroking. Life insurances for employees, their dependents, and terminal illnesses are also on the rise.
Focusing on financial wellness and having it as an integral part of the employee benefits program of 2020 is a critical step in addressing key employee challenges. It is essential to study each of the employee issues in light of the organizational climate and workforce demographics. The financial employee benefits should be carefully crafted to accommodate the top problems identified and should be leveraged efficiently using technology.