The era of simply handing new hires a list of company holidays and details about signing up for health care and retirement benefits is long gone. Nowadays, employers are expanding their range of benefits and acknowledging the growing significance of financial wellness programs for their workforce.
In the current climate of soaring inflation, the need for these benefits has become increasingly evident. According to a financial benefits survey by Morgan Stanley at Work conducted in 2022, HR professionals have noticed that employees facing financial strain are cutting back on retirement savings and expressing how financial anxiety negatively impacts their job performance. The same study revealed that 85% of HR leaders believe financial wellness benefits have gained importance compared to the previous year.
Indeed, 54% of companies currently provide financial wellness initiatives, based on an annual survey performed by the Employee Benefit Research Institute (EBRI). Such offerings can result in substantial positive outcomes. A survey from You Need a Budget (YNAB) showed that “Employees who managed a budget reported considerably lower levels of stress and distraction at work during the pandemic.”
Since financial pressures affect various aspects of an employee’s life—including their physical and mental well-being—financial wellness initiatives should not be seen as merely an additional perk; rather, they can significantly enhance retention, productivity, and employee loyalty, according to Jesse Mecham, the founder of YNAB.
“An employee who feels financially secure and free of stress is likely to remain with their employer longer,” he states. “We strive for them to be productive, joyful, and innovative, and we aim to eliminate money-related stress as an obstacle.”
Advantages of financial wellness programs for employers
Employee retention stands as the primary argument that Mecham uses when discussing the significance of prioritizing financial wellness within the workforce with company leaders. In 2022, YNAB introduced a financial wellness benefits package aimed at employers, which includes access to online workshops, classes, and additional resources.
The most significant increase in adoption of YNAB’s financial wellness program has been observed among smaller businesses employing between 50 and 500 individuals, according to Mecham. Interest in these financial wellness programs, similar to those focusing on mental health, has surged since the pandemic started, he notes. “Employers now seem more willing to consider the holistic needs of their employees.”
Increased productivity among employees.
Financially stressed employees tend to be less productive, impacting employers’ profitability, Mecham explains. “Employees dedicate countless hours each week managing their financial worries, handling bills, and engaging in activities that do not contribute to productivity—all on the company’s clock,” he elaborates.
Business owners skeptical about the value of offering financial wellness programs may become more receptive once they observe the direct advantages to their company—such as enhanced productivity, engagement, and employee loyalty, according to Deniece Maston, an HR knowledge advisor with the Society for HR Management (SHRM-CP). “In today’s world, it’s critical to ask: How can we engage and retain our employees?” she remarks.
Promoting employee retention through financial wellness programs.
Striking a balance between “adequate” wages and “adequate” benefits can be challenging, particularly for smaller businesses, Maston notes. However, business owners must evolve since the landscape has significantly shifted compared to five years ago, with a growing emphasis on benefits that address the overall well-being of employees becoming more prevalent.
The EBRI study indicates that “financial wellness programs are increasingly being introduced or enhanced to boost employee satisfaction and retention.” Employers have also indicated that “financial (non-retirement) benefits” are often deemed more critical than offerings such as “wellness benefits,” “education benefits,” “technology benefits,” and “transportation benefits,” as per the results of the 2022 SHRM employee benefits survey. However, they still rank lower than offerings like “health-related benefits,” “benefits for retirement savings and planning,” and “leave benefits.”
“Companies looking to differentiate themselves from their competitors should consider providing financial wellness benefits to attract employees,” Maston advises. “People actively seek out these types of benefits.”
Advantages of financial wellness programs for employees
A potential issue for companies lies in recognizing the necessity for benefits that focus on financial wellness. For instance, they might notice low participation rates in seminars aimed at 401(k) plans, but they may not be aware that some employees are reluctant to attend because they are struggling with other financial difficulties, such as having recently overdrawn their accounts, Mecham comments.
“We observed a disconnect in messaging,” he notes, emphasizing that YNAB’s program is designed to help employees “appreciate their spending habits,” leading to measurable outcomes. “They’re tackling debt, contributing to retirement—they are accomplishing everything that employers hoped for, yet we first address the underlying issues.”
Employees often confront a spectrum of financial pressures, ranging from recovering from job loss, managing hefty medical bills or credit card debts, to grappling with student loans—all of which may remain unknown to their employers, according to Maston. Companies can assess employees’ interest in financial wellness programs through anonymous surveys, she suggests.
Moreover, given that individuals frequently experience feelings of shame regarding their financial hardships, including YNAB courses anonymously allows employees to participate without fear. “We focus on behavioral change,” notes Mecham.
Discover programs that cater to diverse life stages
Though YNAB offers courses for individuals across various age groups, from recent graduates to those nearing retirement, Mecham mentions that the highest participation rates occur among employees aged 32 to 48. Beyond just age, the programs are aimed at specific life transitions.
“We educate employers on timely discussions about this benefit,” he explains. These might include critical life events such as receiving a pay raise, purchasing a home, getting married, having a baby, or even preparing for tax season with W-2 forms, he adds.
Involving HR departments to disseminate this information can ensure employees are aware of these benefits, particularly regarding significant life events, according to Mecham. “This forms part of a financial wellness program—not merely offering the benefit, but also finding methods to keep employees engaged and remind them of its existence,” he adds.
Transforming behaviors to yield favorable results
Many companies that decide to implement the financial wellness program become aware of it because an employee or manager has previously completed a budgeting program from YNAB, according to Mecham. Regardless of whether individuals attend classes independently or as part of an employer-sponsored initiative, the education revolves around a four-step approach:
- “Assign a job to every dollar”
- “Acknowledge your actual expenses”
- “Adjust to changes”
- “Age your money”
“We guide individuals in reevaluating their financial perspectives, and then we witness behavioral changes leading to positive results,” asserts Mecham. Participants of the YNAB method report increases in savings, reductions in debt, and improved credit scores, he adds.
Providing a platform for employees to openly discuss financial challenges and offering tools to help alleviate these pressures can have profound personal and professional repercussions, Maston states. “Financial stress can cause mental strain, which may lead to lost workdays and consequently affect productivity,” she points out.
Recognizing the extensive benefits of alleviating this stress can be advantageous for both employers and employees, according to Mecham. “When businesses prioritize these initiatives for their workforce, it genuinely enhances the situation since it reduces stress for individuals and promotes happiness,” he concludes.
