Financial Wellness: Prescription for the Bottom Line
Employers helping to facilitate employees’ financial wellness is becoming more widespread. The benefits of this for employees is obvious, but a session at the recent Plan Sponsor Council of America Annual Conference held in Scottsdale, AZ offered another take: it can be good for an employer’s financial wellness too.
In “Calculating ROI: Measuring the Benefits of Workplace Financial Wellness,” Greg Ward, Director of the Financial Wellness Think Tank at Financial Finesse, offered his insights and information on how to gauge the effects of financial wellness initiatives on employees and employers.
Financial wellness, said Ward, is “more than just financial education and literacy.” He argued that financial wellness is a state of being in which an individual maintains:
- a manageable level of financial stress;
- a lifestyle at or below their financial means;
- a strong financial foundation including adequate emergency savings, no high-interest debt, and a sufficient insurance and estate plan to protect assets, income, and loved ones; and
- an ongoing plan to achieve future financial goals.
A person who is financially well makes good financial decisions, according to Ward, and has a higher level of satisfaction with their current financial situation and a greater level of freedom to pursue life on their own terms.Interest Growing, but…
Employer interest in employees’ financial wellness is growing, Ward reported. He cited statistics from Google Trends showing that interest grew by 300% in 2017. In addition, he said, in 2017 82% of employers said they were at least moderately likely to focus on employees’ financial wellness — and to do so in a way that concerns more than retirement planning — and almost half of employees in a study by the Society for Human Resource Management (SHRM) offered some kind of financial guidance as an employee benefit.
Despite the growing interest, however, there remains a strong undercurrent of suspicion among employers that offering financial wellness benefits will be expensive. For instance, Ward noted, almost 60% of human resources professionals Ernst & Young surveyed in 2017 said their employers do not offer a financial wellness program due to what it would cost.The Bottom Line
Ward begged to differ with that view. He cited statistics from a study his thank tank conducted in 2014, in which certified financial planners analyzed anonymous tracking of usage of financial wellness programs by 5,516 employees. They found that by multiple measures, offering a financial wellness benefit can save an employer money:
- Garnishment of employee wages dropped for employers that offered financial wellness programs. Garnishment costs an employer $300 per year.
- Absenteeism also dropped, since there were fewer unplanned absences due to financial issues and stress.
- Contributions to health flexible spending accounts and health savings accounts grew as employee financial wellness improved. And that, in turn, reduced employers’ annual health benefits costs.
- Employee retention improved with the implementation of an employee financial wellness program, sparing employers the expense of recruiting new employees and having to implement other means to retain employees that could be expensive.