Financial Wellness Could Be Key to Reducing Employee Turnover

LAS VEGAS – The COVID-19 pandemic brought new economic burdens to many employees. Then, as the economy recovered, the rate of employee turnover rose sharply.

These developments underscore the importance of improving employee financial well-being.

Although last year the pandemic caused some organizations to cut spending on non-health services, financial wellness offerings – including access to emergency funds, financial planning, and student loan assistance – could be reconsidered to improve employee wellbeing . Increase employee retention and attract new employees, according to a new survey report by SHRM and financial services company Morgan Stanley.

Unlocking the full potential of the wellness financial benefits was revealed on September 11th at the SHRM Annual Conference & Expo 2021 in Las Vegas and virtually.

To determine the current state of financial well-being in the U.S., as well as employers’ response to this new imperative, in June 2021, SHRM and Morgan Stanley surveyed 1,000 working Americans, 1,000 unemployed Americans who have lost their jobs or given up from the start of COVID -19 pandemic and 1,205 HR experts.

Meet employee needs

Almost 3 in 4 (74 percent) surveyed HR professionals said their company has not added any new services or expanded existing services to help employees manage their financial stresses since the pandemic began. At the same time, American jobs are seeing record employee turnover, with more U.S. workers leaving their jobs than ever before in at least two decades.

Employees who believe that their employer does not care about their physical, emotional and financial wellbeing often feel less engaged at work and are more likely to look elsewhere. This can be especially the case if you are concerned about your financial situation.

A number of advantages

The most common financial wellness benefits offered by employers were:

  • Retirement plans (offered by 95 percent of organizations by HR experts)
  • Safety net insurance, such as life and occupational disability insurance (89 percent).

Fewer employers offer the following advantages:

  • Financial planning for long-term security, such as meetings with a financial advisor on asset management, investments, and estate planning (35 percent).
  • Financial coaching on the basics of personal finance, such as advice on personal budgeting, saving, debt and credit management (24 percent).
  • Emergency savings fund (15 percent).

The surveyed HR managers who offered these financial wellness benefits stated that the offers have been used more since the beginning of the pandemic, in particular emergency funds (named by 24 percent), financial planning (20 percent) and financial coaching (22 percent).

Different needs of employees

The existing workforce and the future workforce – which includes the currently unemployed – have different financial needs and values, so organizations that wish to retain and hire existing employees among the unemployed may have to employ different strategies for these two groups.

Financial Health of SHRM 2021 - Key Benefits.png

Source: Unlocking the Full Potential of Financial Wellness Benefits (September 2021).

Educational benefits

Education benefits – like tuition reimbursement, 529 plans, and employer-provided student loan repayment – are offerings that are highly valued by employees: 18 percent of American working people consider this one of the most important employer-funded financial wellness benefits for their financial needs and goals, the survey found.

A little more than one in ten hiring managers (11 percent) say the use of educational coverage has increased since the beginning of the COVID-19 pandemic, while 14 percent say their employer plans to focus on these benefits in the coming year.

Large companies with 5,000 or more employees are more likely to offer educational services (73 percent do so) than companies with fewer than 500 employees (36 percent).

The Gesellschaft für Personalmanagement supports the expansion of the educational grants provided by the employer to include the repayment of student loans and the increase in the monetary limit in order to give employers flexibility in the design of service offers for recruitment and retention purposes.

“SHRM has long been committed to policies that enable employers to offer educational support programs that are relevant to the modern workforce,” said James Redstone, director of public policy at SHRM. “More security in the tax treatment of educational grants is an important step in expanding the range of such benefits.”

Emergency fund vs. retirement plan

Although only 15 percent of HR professionals surveyed said their employer offers emergency funds – usually in the form of pay advances or emergency savings financed through payroll deductions – 45 percent of unemployed Americans and 16 percent of working Americans consider it one of the most common major employer-funded funds financial wellness benefits.

The much larger number of unemployed people who value emergency funds seems to suggest that this is an achievement that is growing in importance in the midst of job loss.

Of those hiring managers whose organization offers emergency funds, almost one in four (24 percent) said the use of emergency funds has increased since the pandemic began. However, only 6 percent of hiring managers said their employer plans to focus on emergency funds over the next year to help manage the financial stress of employees.

“Employers’ interest in emergency savings programs lies in both the direct potential benefit for employees and the benefit to employers in terms of increased employee satisfaction,” said Craig Copeland, senior research fellow at the nonprofit Employee Benefit Research Institute. Meeting short-term savings needs “could lead to better long-term results because, unlike retirement planning, emergency saving could help keep assets in [defined contribution retirement] Plans that could otherwise be tapped for emergencies. “

“Sometimes the most effective solutions are the simplest,” said Susan Shoemaker, a pension advisor at CAPTRUST’s Southfield, Michigan office. “It takes time, but encouraging a participant to save enough to cover at least three months’ worth of expenses is the most practical approach to averting an emergency.”

Women at higher risk

35 percent of the working women surveyed said their financial health or situation had suffered from the pandemic, compared with 23 percent of working men.

Aside from the pandemic, the report identified factors that contribute to the gender gap in financial well-being, such as:

“Although much smaller than it used to be, the gender pay gap persists and has a significant impact on women’s ability to save for retirement,” the US Government Accountability Office recently reported.

Retention strategy

Employers can use financial wellness programs as part of a retention strategy, the report explains, by assessing workforce financial needs and then taking steps to:

  • Identify short term goals B. involve more employees in the program or research other financial wellness programs.
  • Identify long-term goals B. Make changes to the current financial wellness program.
  • Establish metrics to measure success such as usage rates, program costs, employee retention, contributions to retirement plans, automatic savings programs and health savings accounts, as well as employee feedback on financial stress levels, debt levels, willingness to retire and financial literacy.

Employee communication

Many employees have limited knowledge of the benefits available to them or how helpful these offers can be for their financial health. SHRM’s report advises employers to:

  • Use a compelling communication strategy. In addition to individual advice, seminars and online tools, effective communication is the key to a successful financial wellness program. This can be accomplished by creating a financial wellness logo or slogan, or an infographic indicating research into the benefits of financial wellness programs.
  • Use targeted communication. Certain segments of your workforce value some benefits more than others. Differences in the evaluation of performance are common among men, women, executives, managers and line staff, for example. Customize your message for each group to show them how the benefits will help in their unique situation.

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