Even before the COVID-19 pandemic, many employees were experiencing low financial well-being. Now, the public health crisis brings additional financial challenges.
What is financial well-being?
Financial well-being refers to the amount of security and freedom one has in their financial situation, according to the Consumer Financial Protection Bureau. More specifically, financial well-being is achieved when an individual has control over daily and monthly finances, can cover family emergencies, and is on track to meet financial goals, such as retirement, according to the Association of Credit Professionals.
What causes low financial well-being among employees?
According to the 2019 U.S. Financial Health Pulse Report, 54% of working Americans were suffering from low financial well-being prior to COVID-19. That means about half Americans are overworked, struggling to make ends meet, or are not contributing enough into savings. Low financial well-being is caused by:
- Decades of slow wage growth
- Rises in cost of living, education, health care, and housing
- Irregular work schedules
- Nonexistent employer benefits
- Inadequate health insurance
- Loss of retirement plans
Why employee financial well-being should be a priority for employers
- Finances were the number one cause of stress and depression among Americans before COVID-19, according to the American Psychological Association. We can assume financial stress levels have increased since. When employees are suffering from financial stress and struggling to provide for their families, a shift in work ethic happens. Distracted employees lead to low productivity and engagement where focus is critical.
- Low financial well-being among the workforce has a significant impact on turnover, employee engagement, customer service, and company profit, explains Jim Purcell, co-founder of the Returns on Wellbing Institute, in a recent webinar.
- Low financial well-being directly contributes to physical and mental health issues among employees, including:
- Heart disease
- Substance use disorder
What employers can do
A recent WellRight webinar featuring Jim Purcell and Steven Van Yoder, co-founders of the Returns on Wellbeing Institute, outlined three steps employers can take to prioritize employee financial well-being:
Step 1: Those working in HR are the critical connection between employees, management, and stakeholders. Organize an employee survey to understand where they may be struggling financially. Use the results as a tool to illustrate why a financial well-being program is needed in your organization.
Step 2: Find ways to keep more money in your employees’ pockets. Advocate for increasing wages throughout the organization. While this will be an investment up front, it will pay off long term with less turnover and more loyalty from employees.
Step 3: Implement or enhance financial well-being programs.
- Communicate your company’s Employee Assistance Program (EAP).
- Host workshops and share online resources to help employees self-assess their own financial situation and manage their money.
- Partner with a credit union so employees can reap the benefits of becoming a member. Visit National Credit Union Administration at mycreditunion.gov to learn more.
- Consider an income advance program. The credit union your organization partners with can advance payments to employees in the event of an emergency.
- Create an employee purchasing program. Find a common thread among businesses in the community where your employees are spending money and partner with those businesses to offer discounts. For example, local restaurants, cafes, and salons.
- Start an employee childcare program. Reliable and affordable childcare can make a significant difference in employee productivity, engagement, loyalty, and turnover.
- Support and encourage employee entrepreneurship. More than 50% of millennials have a side hustle apart from their day job. It is important to support their freelance efforts and understand the need for additional income during these uncertain times.
Employee financial well-being should be a priority for employers, especially during the COVID-19 pandemic. By creating financial well-being programs, employers can reduce stress and turnover while improving engagement, productivity, job satisfaction, profit, and employee physical and mental health.