Why are financial wellness benefits necessary? ► FINCHANNEL
A recent CNBC report found that nearly 77% of Americans are concerned about their financial situation. So when these people show up at their workplace, they get distracted thinking about addressing financial issues.
In fact, more than half of employees experience financial stress that affects productivity and results in business losses for their employers.
You may be shocked to know that employee financial stress is costing companies nearly $ 5 billion a week.
Therein lies the importance of financial health. But what does it mean?
Financial wellbeing refers to having a healthy and stress-free relationship with your finances. This means you can live a happy life and focus on meeting your financial goals.
An employer can play an important role in providing financial wellness programs that help employees grow their business.
In September 2021, Bank of America published the key results of its 11th annual Workplace Benefits Report. The study found that “95% of employers feel responsible for the financial health of their employees, up from 81% in 2015, and more than half (56%) feel extremely responsible.”
An Employee Financial Wellness survey conducted by PwC shows that nearly 71% of employees who receive financial wellness benefits use them to:
Retirement provision (47%)
Spend control (29%)
Pay off debt (29%)
Asset Allocation Management (29%)
Health Expenditure Management (18%)
Why are health financial benefits so important to employees?
Kevin Crain, Head of Workplace Solutions Integration at Bank of America, said, “Now employers are saying, ‘I have a far greater responsibility here than just offering retirement plans.’ Employers are responsible for making savings in healthcare and for providing more immediate education and programs to help employees in a holistic way. “
But why do employers say that? Here are the reasons for offering financial wellness programs to employees:
If you are not in financial stress, you will not feel distracted. After all, you can concentrate fully on your work and your productivity will increase. The 2021 PwC Employee Financial Wellness Survey found that employees who were exposed to higher financial stress due to the pandemic were four times more likely to accept that financial problems lead to distraction at work.
Reduces the employee turnover rate
Hiring and training new employees is a cumbersome and costly undertaking. So when employee turnover gets high, it can be a setback for the company.
According to PwC’s annual Employee Financial Wellness Survey, 72% of workers experiencing financial hardship due to the pandemic said they would like to work for an employer who is more concerned about their financial well-being than their current employer.
When an employer offers their employees financial wellness benefits, they become more loyal and committed to their company.
Improves physical and mental health
Constantly feeling stressed about your finances can affect your physical health. It can lead to various chronic diseases like high blood pressure, diabetes, etc.
Furthermore, constant financial stress can also affect your mental health. Carla Marie Manly, a clinical psychologist in California, said, “When we are stressed about money, we can become very anxious and even depressed.”
So if you are getting financial wellness benefits, you will not have to worry about your finances. As a result, it will improve your mental and physical health.
What are the different types of employee financial wellness programs?
Here we have listed some of the financial wellness programs employers can implement to take care of their employees:
Retirement provision and equal contributions
A 2021 report by the US Bureau of Labor Statistics shows that approximately 67% of workers in the private sector had access to retirement plans by 2020.
The remaining 33% of employees who don’t have access to 401k may struggle to save for retirement. Employers who are not yet offering 401k benefits should start doing so as soon as possible.
And the employers who offer these services should make appropriate contributions. Offering appropriate contributions is one of the best ways to retain talented employees and improve employees’ financial health.
As a rule, 401,000 matching contributions depend on the employer. Your employer pays a certain amount based on your annual contributions.
According to the Bureau of Labor Statistics, the average matching contribution of 401,000 is only 3.5%.
So employers can be a little more generous when they provide matching contributions. For example, Qualcomm follows this formula:
100% match on the first $ 1,500
50% match on the next $ 1,500
33% match on the next $ 7,500
Thereafter, 10% match up to the IRS contribution limit of $ 19,500 or $ 26,000 (if 50 or older) in 2021.
Student loan repayment
An employer needs to remember that young workers are an asset to an organization. They are more enthusiastic about their job and have fresh and new ideas to help their company grow better.
But often these young employees are stressed out about their finances. A Business Wire survey found that student loan debt is taking a mental toll on young employees.
An employer can help by offering a student loan repayment program. Pursuant to Section 2206 of the CARES Act, an employer may make up to $ 5,250 in student loan payments for an employee either directly to the employee or to the student loan service provider in one year.
The best part is that this money is tax-free and the employer also receives an income tax exclusion on this amount.
At the same time, this repayment program helps employees to pay off their student loan. Ultimately, the employee is likely to be more committed to their company.
Kathy Barber, Vice President of Benefits and Compensation for Goldman Sachs Ayco Personal Financial Management, said, “Since the public health crisis began, the majority of employers have taken steps to improve the financial well-being of their employees, and one of the most important Popular perks that companies have either expanded or offered is student loan repayment assistance. “
Offering flexible paydays is one of the newest workplace benefits for retaining top talent. Employees can choose the date they want to receive their paychecks. You can easily pay off debts without waiting for the firm’s fixed payday.
This benefit can help employees better plan their finances and avoid late payments.
Financial education programs
Employee financial literacy programs focus on making more accurate financial decisions and managing money better. It can also help an employee in various areas, such as:
repaying debts; to repay debts
Create emergency funds
According to a realistic budget
Use credit cards wisely
Saving for children’s education
Businesses can turn to certified financial planners to help their employees get the best possible financial advice and plan accordingly. This way, employees can secure their future and are likely to stay stress free.
The bottom line is that financial wellness benefits are undoubtedly an excellent initiative to take care of your employees. As we discussed above, it can help reduce employee stress levels to a great extent.
Employees can concentrate more on their work and enjoy their life today without stress. After all, it will help build a stronger bond with the employer, and the company’s earnings will likely grow many times over.
Lyle Solomon has considerable litigation experience as well as extensive practical knowledge and expertise in legal analysis and writing. He graduated from the University of the Pacific’s McGeorge School of Law and is now the Principal Attorney for the Oak View Law Group (https://www.ovlg.com)