Is financial wellness in your open enrollment plan?
As the pandemic shapes a new workplace, financial health for employees is front and center.
Financial wellness is at the top of the benefits agenda this year during open enrollment season, as companies and employees continue to grapple with the impact of the COVID-19 pandemic.
Two new surveys of HR leaders at leading companies across corporate America by Goldman Sachs Ayco Personal Financial Management make this clear. The insights uncovered can help HR teams design and implement benefit programs that address the wants and needs of employees in the current environment.
Financial wellness benefits are on the rise according to the nearly 250 HR executives we polled. More than half offer their employees a financial wellness benefit, and close to two-thirds of those provide financial planning to their entire workforce, not just executives.
Our bi-annual Executive Benefits Survey showed similar results. Financial education benefits for all employees jumped 11% compared to 2019—one of the largest increases among benefits offered by the 260 companies who responded.
Why are financial wellness benefits on the rise? Here’s what we are seeing and hearing from HR leaders at the hundreds of companies we work with and the 1 million+ employees across America who have access to our financial wellness benefits.
Better attraction and retention
The U.S. economy set a record last July, with 10.9 million jobs open. Another record followed in August – 4.3 million U.S. workers quit their jobs.
With such extreme workplace churn, more companies are recognizing how a bespoke, dedicated financial wellness benefit can help them attract and retain top talent.
These programs address head on the financial anxiety that so many employees experience, and that the pandemic accelerated. When financial wellness benefits include compensation and benefit planning, they also help employees better understand, appreciate and realize the total value of everything their employer provides them. That can be a real difference-maker when a recruiter comes calling.
Benefits generally make up 30% of an employee’s total compensation, but it rarely registers as such. Basic benefits such as health care and retirement accounts are often seen as table stakes, but different plan designs and options vary widely in the monetary value they provide. Employees often fall short in realizing the full value of their benefits, for example by not maxing out their 401(k) or funding an HSA.
Companies that provide a comprehensive financial wellness benefit make a powerful statement to their workforce by supporting employees where it counts most: their wallets. We all work to live, not live to work. Financial wellness benefits are valued by job-seekers and employees alike because they maximize the value of their work so they can better live the life they want. They help employees achieve their financial goals and help them get more value from the benefits their company offers.
Technology as a gateway
Apps with gamification features are increasingly becoming more common to support employees’ financial wellness. They’re simple to introduce and use, and don’t require much administrative support. Often they’re offered as “freemium” add-ons from providers of traditional benefits like a 401(k).
The true aim of a financial wellness benefit is to create a financially well workforce. Digital resources are a great start, but they require employees to go it alone on their financial wellness journey. Money decisions are inherently complex and anxiety provoking. These “freemium” platforms can only do so much to unwrap the complexities of the human experience, motivate individuals to take action and provide the reassurance that comes from speaking with an experienced professional.
In our experience, apps and other digital products have to be balanced with human interaction to create lasting financial wellness outcomes. Personal conversations and empathy, beyond what “freemium” solutions can provide, are critical to success.
In its most evolved form, the financial wellness experience is essentially bionic – technology that makes it easy to engage, discover resources and find solutions, and a human connection to support a truly human need.
Growing in scope and scale
As the need for financial wellness benefits grows, financial wellness programs need to grow as well.
The pandemic has fundamentally altered a lot about the workplace, including employees’ financial stress and the support they expect from their employer. In the last year, Ayco has seen many employers add to their financial wellness support to assist employees with crisis budgeting, voluntary early retirement, and support for survivors who lost a loved one.
Employers can certainly provide more and better financial benefits without significantly increasing a program’s scope. Possibilities include advancing paychecks for immediate needs, spot loans that can be repaid through payroll deductions, childcare subsidies, and relief funding for employees facing severe hardships.
In the long run, however, achieving a financially well workforce will require greater scale, more human interaction, and more partnering with specialists.
A dedicated financial wellness provider can be especially helpful in professionalizing their most sensitive dynamics. An outside partner can provide an extra layer of privacy between employees and their company, and a resource to help employees separate their anxiety over personal finances from their performance on the job.
Broader adoption across employer types
Last year, a few months into the pandemic, 42% of companies with more than 500 employees were providing financial wellness support, according to the Employee Benefits Research Institute (EBRI). Only 25% of companies with less than 50 employees offered such a program. However, this was before the full impact of the pandemic changed how we work and live.
The need for financial wellness support is now broader than ever because personal finances have become far more complicated. Employees have dealt with sudden financial events like stimulus payments and child tax credits, suspension of student loan payments, a chance to waive penalties for early withdrawals from 401(k)s, and the ability to pause or reduce monthly mortgage payments.
More mid-sized and small companies, along with startups and entrepreneurs, either have already or will soon recognize that employees need help managing their personal finances, and that a dedicated financial wellness solution (not just a “freemium” offering) belongs in their benefit program.
It’s especially relevant for the younger employees, who increasingly want their employers to offer more innovative compensation packages and who are less experienced in personal financial management.
Our financial wellness mission
Whatever forms of hybrid work take shape after the pandemic, companies will need to navigate a new paradigm in workplace psychology.
Employee expectations of employers have evolved with the rise of stakeholder capitalism, and employees seeking a larger purpose in the work they do.
Add to that the recent historic financial stress and its continuing aftereffects. The results are apparent: Ongoing financial anxiety, and a deep desire in the workforce for financial relief.
Seven in ten employees say they need their employers’ help to be financially secure, and six in ten say they expect it, according to the EBRI.
It’s time for all employers step up and do more to provide truly comprehensive support for their employees’ financial wellness. We believe companies best serve their stakeholders and the greater economy when their employees’ financial lives are clear, understood and in their control. Productivity increases, absenteeism drops, retention improves, and HR teams are less taxed. Equally important, employers gain reputational advantage, clearly demonstrating they invest in their people and are committed to a healthier workplace.
Now and going forward, comprehensive financial wellness support belongs center stage in corporate America’s benefits packages.
Greg Wilson is the head of workplace solutions at Goldman Sachs Ayco Personal Financial Management, an industry pioneer and preeminent leader of company-sponsored financial planning services.
Research for “Is Financial Wellness in Your Open Enrollment Plan?”
Better Attraction and Retention: A record 10.9 million jobs were open at the end of July, 2021, according to the Bureau of Labor Statistics. Harvard Business Review, September 15, 2021, “Who is Driving the Great Resignation.”
Another record followed in August – 4.3 million U.S. workers quit their jobs. CNBC, October 12, 2021, “A Record 4.3 Million Workers Quit Their Jobs in August, Led by Food and Retail Industries.”
Broader Adoption Across Employer Types: Last year, a few months into the pandemic, 42% of companies with more than 500 employees were providing financial wellness support, according to the Employee Benefits Research Institute (EBRI). Only 25% of companies with less than 50 employees offered a program. EBRI, December 3, 2020, “The Value of Workplace Financial Wellness Benefits to Employees.”