How to calculate the ROI for employee financial wellness programs
The effectiveness of financial wellness programs can be tracked via several key indicators.
If an employer could wave a magic wand, what would they wish for? In terms of their company, most would want to see an increase in yearly profits. In terms of employees, most would want employees that are happy, healthy, and dedicated to their work.
Providing a comprehensive employee financial wellness program can help achieve both.
Workplace financial wellness programs continue to gain traction. Between 2015 and 2019, the number of companies providing this benefit more than doubled from 24 to 53 percent, according to the Bank of America 2019 Workplace Benefits Report.
Financial wellness programs, however, are more than just a craze—they provide both employers and employees enormous benefits.
The Employer’s Guide to Financial Wellness 2019 Report from Salary Finance states that a majority of employees feel financial stress, with 56 percent of employees considering themselves financially unwell. These employees bring that financial stress to work, with a large percentage saying that they spend three or more hours each week dealing with financial issues while on the job.
On average, employee financial stress costs a 1,000-employee company $240,032 in productivity per year. Not only that, financially unwell employees often need to work past retirement age, which is shown to be costly to employers. A one-year increase in average retirement age can increase workforce costs about 1 percent to 1.5 percent annually, according to Prudential Insights.
It is essential that employers offer a financial wellness program that meets the needs of all employees and focuses on positive behavior changes. It’s also important to measure the program’s effectiveness. An effective financial wellness program should lead to measurable ROI.
Financial wellness is more than retirement planning
Many companies only offer programs that focus almost exclusively on retirement planning or even more narrowly on company-sponsored retirement plans. However, only 51 percent of private-sector employees participate in a workplace retirement plan, according to the Pension Rights Center. In fact, 25 percent of Americans have no money in a retirement fund, states a 2019 report by the Board of Governors of the Federal Reserve System.
That is why broader financial wellness programs achieve better results. Such programs not only look at retirement but at all aspects of financial wellness, from budgeting to credit to home buying to identity theft. Financially fit employees make wiser financial decisions and improve their financial wellness. This leads to lower financial stress, improved workplace productivity and a higher probability of retiring on time—all of which boosts the company bottom line.
Tracking metrics
The effectiveness of financial wellness programs can be tracked via several key indicators. Below are some key metrics to track (for a full guide including formulas and research data, download the Enrich guide to Calculating the ROI for Employee Financial Wellness).
Increased participation in retirement plans: Increased enrollment in and contributions to employer 401(k) plans, automatic savings programs and health savings accounts (HSAs) can indicate that employees have extra money to save and invest. Employers using one vendor’s financial wellness platform found a 15 percent increase in contributions to employer-sponsored retirement plans and maximum contributions increased by 10 percent.
Reduced 401(k) loans and hardship withdrawals: Payroll and 401(k) plan data on the number of outstanding 401(k) loans and the frequency of 401(k) hardship withdrawals can indicate the level of financial hardship employees are experiencing.
Reduced number of delayed retirements: 42 percent of financially stressed employees expect to spend the majority of time in retirement working because they’ll need to financially, according to PwC’s 9th annual Employee Financial Wellness Survey. Prudential Insights data shows that a one-year increase in average retirement age results in an incremental cost of over $50,000 for an individual whose retirement is delayed.
Reduced healthcare costs: 40 percent of financially stressed employees feel that financial issues have affected their health, the PwC survey states. Data on disability and workers’ compensation claims, as well as on health benefits claims for stress-related illnesses, can help employers measure the results of financial wellness benefits.
Soft metrics: Mental, social and emotional well-being continue to grow in importance. CEOs who care about running a successful business also care about employee well-being, so monitoring “soft” metrics related to emotional health and wellness is essential.
Employee sentiment ties directly to productivity, engagement, retention and turnover, all of which are linked to profitability. The PwC survey revealed that 78 percent of financially stressed employees and 63 percent of non-stressed employees would be attracted to another company that cares more about financial well-being. Millennials (46 percent), Gen X (44 percent), and Baby Boomers (30 percent) say their commitment to their company is influenced by how much the company cares about their financial well-being, the survey states.
Discovery Surveys found that employees who are proud of their companies are more engaged in their work and will stay with the organization longer. Since it costs an average of $4,129 to recruit a new employee, the money saved through lower employee turnover can be substantial.
To find the best financial wellness program for your company, look for one that: 1) Meets the needs of employees as well as the employer; 2) Focuses on short-term and long-term needs, not just retirement; 3) Offers concrete financial assistance; 4) Is flexible and individualized; 5) Provides privacy to individuals, so they feel comfortable sharing money concerns and issues, and 6) Is self-paced.
