2020's impact on companies' responses to employee financial wellness
Here are some of the most prevalent financial issues that have affected both employees and employers in 2020.
The last time we saw a massive surge in financial stress was during the 2008-2009 financial crisis. At that time, many companies started to offer more customized and voluntary benefits. The recession led to a disloyal and dissatisfied workforce, impacting employees in a variety of ways. As a result, employers were faced with balancing increased benefit costs and decreased employee retention.
After the 2008 recession, employers reprioritized employee financial benefits to increase loyalty and satisfaction in order to retain their workforce. Unlike before the recession, employers and employees recognized that there was a link between employee’s financial well-being and physical and mental health.
In the years that followed, an increasing number of companies offered financial advice or education programs as part of their employee benefits package.
In 2009, only 12% of companies offered financial literacy programs. This number doubled by 2012 with 28% of organizations offering one-on-one financial advice and 24% offering online financial advice.
Fast-forward to 2020. As compared to the 2008 recession, there are many similarities with the impacts of the COVID-19 pandemic. Here are some of the most prevalent issues that have affected both employees and employers in 2020:
Financial well-being. In addition to changing the way people live on a regular basis, COVID poses substantial short and long-term threats that may have a lasting effect on employee’s financial wellbeing. Newly attributed to the pandemic, financial wellbeing is the top cause of employee stress, creating a major distraction at work.
Additionally, employees are more concerned with financial wellbeing than they are about their physical, mental or social health. In 2018, 61% of employees rated their financial wellness as good or excellent, but this decreased to 49% in 2020. As a result of increased financial anxieties, employees are now looking to their employers for help.
Short-term cash. According to a PwC survey, many employees are unprepared for short-term cash needs, with 38% of all employees having less than $1000 to deal with emergency expenses.
Retirement plans. Over half of millennials and Gen X employees say they plan on using money in retirement plans for expenses other than retirement, such as unexpected payments or medical bills. Moreover, they’re withdrawing from their retirement plans early, further damaging an already underfunded long-term nest egg.
Financial stress and the bottom line. Employees are less productive, have decreased presenteeism and are ridden with financial anxieties. Now, more so than ever before, companies see a return on a financial wellness investment. Additionally, 62% of employers now feel “extremely responsible” for their employee’s financial wellness, as compared to 13% of employers in 2013.This year alone, 72% of employers saw an increased usage of financial wellness resources. 83% of employers believe financial wellness tools improve employee productivity.
Many employers have already started taking steps to protect the financial wellbeing and health of their employees. 22% of employers surveyed in the WTW COVID Benefits report stated that supporting financial wellbeing is a top benefit priority over the next six months. Additionally, more companies are offering holistic approaches to financial wellness.
Companies that facilitate their workforce through the health, economic and social hardship resulting from the pandemic will be better situated to provide personalized support for employees, regardless of where they are in their financial journey.
Ultimately, improving employee financial health is a long-term effort. There is no ‘quick fix’. But, there are holistic programs that help.
Employers can open the door to financial wellness and encourage employees to take the next step that’s right for their situation, helping them withstand shock in the future.
