Why are financial wellness benefits necessary?

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A recent CNBC report has revealed that almost 77% of Americans are anxious about their financial situation. So, when these people turn up in their workplaces, they face distractions thinking about tackling financial issues.

In fact, more than half of employees experience financial stress, impacting productivity, and resulting in business losses for their employers.

It might shock you to know that employee financial stress costs companies nearly $5 billion a week.

There lies the importance of financial wellness. But what does it mean?

Financial wellness refers to a healthy and stress-free relationship with your finances. That means you can lead a happy life ahead and focus on attaining your financial goals.

An employer can play a major role in providing financial wellness programs to help employees drive their business forward.

In September 2021, Bank of America revealed the key findings from its 11th annual Workplace Benefits Report. The study has found that “95% of employers feel a sense of responsibility for the financial wellness of their employees, up from 81% in 2015, and more than half (56%) feel extremely responsible.”

An Employee Financial Wellness Survey by PwC reveals that almost 71% of the employees having financial wellness benefits used them for:

Retirement preparation (47%)

Spending control (29%)

Paying off debt (29%)

Saving (29%)

Asset allocation management (29%)

Managing healthcare expenses (18%)

Why are employee financial wellness benefits essential?

Kevin Crain, head of workplace solutions integration at Bank of America, says, “Now employers are saying ‘I have a much greater responsibility here than just offering retirement savings plans’. Employers have a responsibility for healthcare savings, and to provide more immediate education and programs to help employees in a holistic way.”

But what makes employers say this? Here you can find the reasons behind offering employee financial wellness programs:

Increases productivity

When you don’t have financial stress, you won’t feel distracted. Eventually, you can fully concentrate on your work, and your productivity will increase. The 2021 PwC Employee Financial Wellness survey has found that employees who experienced higher financial stress due to the pandemic were four times more likely to accept that financial problems led to distraction at work.

Reduces employee attrition rate

Hiring and training new employees is a cumbersome process and costly affair too. So, when the employee attrition rate becomes high, it can be a setback to the company.

According to PwC’s annual Employee Financial Wellness Survey, 72% of workers who went through financial hardships due to the pandemic said they would like to work for an employer who was more concerned about their financial well-being than their present employer.

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So, if an employer offers financial wellness benefits to their employees, they become more loyal and committed to their companies.

Improves physical and mental health

If you are constantly feeling stressed about your finances, it can take a toll on your physical health. It can lead to various chronic diseases like hypertension, diabetes, etc.

Besides, constant financial stress can affect your mental health as well. Carla Marie Manly, a clinical psychologist in California, said, “When we are stressed about money, we can become highly anxious and even depressed.”

So, if you receive financial wellness benefits, you won’t be stressed 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 that employers can implement to take care of their employees:

Retirement plans and matching contributions

A 2021 report by the US Bureau of Labor Statistics shows about 67% of private industry workers had access to retirement plans in 2020.

The remaining 33% of employees who don’t have access to 401k can face difficulties saving for retirement. So, the employers who are yet to offer 401k benefits should start it asap.

And the employers who offer these benefits should make matching contributions. Offering matching contributions is one of the best ways to retain talented workers and improve employees’ financial health.

Usually, 401k matching contributions depend on the employer. Your employer would contribute a specific amount based on your annual contributions.

According to the Bureau of Labor Statistics, the average 401k matching contribution is about a mere 3.5%.

So, employers can be a little more generous in providing matching contributions. For example, Qualcomm follows this formula:

100% match on first $1,500

50% match on the next $1,500

33% match on the next $7,500

10% match after that till the IRS contribution limit of $19,500 or $26,000 (if 50 or older) in 2021.

Student loan repayments

An employer has to keep in mind that young employees are assets to an organization. They are more enthusiastic about their jobs, and they have fresh and new ideas to drive their companies for better growth.

But often, these young employees are stressed about their finances. A survey by Business Wire has revealed that student loan debt takes a mental toll on young employees.

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An employer can help by providing a student loan repayment program. According to the Section 2206 of the CARES Act, an employer can make up to $5,250 in student loan payments for an employee within a year either directly to the employee or the student loan servicer.

The best part is, this money is tax-free, and the employer also receives a payroll tax exclusion on that amount.

At the same time, this repayment program will help the employees pay off their student loans. Eventually, the employee is likely to become more committed to their company.

Kathy Barber, Vice President of Benefits and Compensation at Goldman Sachs Ayco Personal Financial Management, said, “Since the public health crisis began, the majority of employers have taken action to address the financial well-being of their employees, and one of the most popular benefits companies have either expanded or begun to offer is student loan repayment assistance.”

Flexible paydays

Offering flexible paydays is one of the latest workplace perks to keep top talent. Employees can choose the date when they prefer to receive their paychecks. They can make debt payments easily without waiting for the company’s fixed payday.

This perk can help employees better plan their finances and avoid delinquency on their bills.

Financial literacy programs

Employee financial literacy programs focus on making more precise decisions regarding finances and handling money in a better way. It can also help an employee in various areas like:

Retirement planning

Paying off debt

Creating emergency funds

Following a realistic budget

Using credit cards wisely

Saving for children’s education

Companies can contact Certified Financial Planners to help their employees get the best financial advice possible and plan accordingly. By doing so, employees can secure their future and are likely to remain stress-free about it.

So, the bottom line is that financial wellness benefits are undoubtedly an excellent initiative to take care of employees. As we discussed above, it can help reduce employees’ stress levels to a great extent.

Employees can focus on their work more and enjoy their present life with no stress. Eventually, it helps create a stronger bond with the employer, and the business’s revenue will likely increase manifold.
Author Bio

Lyle Solomon has considerable litigation experience as well as substantial hands-on knowledge and expertise in legal analysis and writing. He graduated from the University of the Pacific’s McGeorge School of Law and now serves as a principal attorney for the Oak View Law Group (https://www.ovlg.com)

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