The price employers pay for neglecting financial wellness

 One of the most common questions benefits advisors probably hear from clients is, “why should I invest in this new benefit?” And employers should be asking this question. After all, they’re investing a ton of time, money, and resources in introducing these new offerings to their employees.

There are two ways you can answer: You can tell your clients what they’ll gain if they invest or what they’ll lose if they don’t. While your instincts may nudge you to go with the former, psychology tells us otherwise. Why?

Thanks to a cognitive bias called loss aversion, most people prefer avoiding losses to acquiring equivalent gains. With this in mind, I’m going to use this article to help you prepare for conversations with clients about financial wellness benefits—and explain what they may lose by not investing in them.

Keep in mind, we’re not trying to use fear-mongering tactics here. Instead, we want to help your clients make a research-driven decision and understand exactly what they’re saying “no” to when they choose not to invest in financial wellness benefits.

Based on my research, here’s what your clients may lose if they choose to put financial wellness benefits on the back burner:

1. Savings on health care costs

To say that health care is expensive is a massive understatement. I’m guessing almost all of your clients want to identify strategies to help them reduce health care costs while also providing the best care for their employees.

You might be saying, “Yes, but what does financial wellness have to do with health care costs?” 

Fair question! While financial wellness and health may seem unrelated, this is far from true. Your employees are more stressed about money than other life stressors combined. This type of financial stress directly impacts health—negatively affecting everything from blood pressure levels to sleep quality. Unaddressed, this will end up adding to your health insurance bill.

But studies have shown that a financial wellness program can help keep those costs down. One Fortune 100 company found that the average employer health care costs associated with employees who used the organization’s financial wellness program decreased by 4.5%, while the costs associated with employees who never used the program increased by 19.4%. This translated to cost savings of $271.50 per employee.

2. Potential revenue

As you might imagine, financial stress doesn’t just impact employees in their personal lives—it affects them at work too.

But this isn’t just a minor inconvenience. It has a significant impact on employers’ bottom lines. Specifically, the lost productivity and increased absenteeism of financially-stressed employees is costing your clients an estimated $250 billion per year.

Thankfully, financial wellness offerings can help out here, too. Improving employees’ financial wellness can decrease the average number of hours of unplanned absences. One study found that the average of unplanned absences fell from 13.73 hours to 10.35 hours—potentially saving employers millions of dollars.

3. Top talent

Everyone knows that top talent is hard to find and even harder to retain. But your clients may be at risk of losing their highest-performing employees if they don’t start offering financial wellness benefits this year. Why?

Financially stressed employees are 2.3x more likely to look for a new job. And due to the economic effects of COVID-19, nearly 60% of respondents feel it’s more critical now that employers offer financial wellness benefits. Plus, half of the respondents in a recent survey said they would be more committed to staying at their job if their employer offered financial wellness benefits.

Related: Why are companies still slow to offer financial wellness benefits to hourly workers?

If your clients ignore this increasing demand for financial wellness support, they may see their retention rates plummet. It may also be worth reminding your employers that replacing workers requires one-half to two times the employee’s annual salary.

4. The opportunity to address financial inequality

Finally, many of your clients probably prioritize DEI initiatives at their companies, but they might not realize that the benefits they offer can be part of their DEI strategy. For example, consider the role of financial wellness benefits in addressing economic disparities in the workplace.

It’s no secret that the United States suffers from extreme economic inequality. According to the Federal Reserve, compared to their white counterparts, people of color have lower wealth and lack access to inter-generational transfers, homeownership opportunities, tax-sheltered savings plans, and financial education.

These financial disparities don’t just disappear in the workplace. Studies confirm that employees of color are more likely to experience high levels of financial stress and carry more debt. And their jobs are often the only place where they can access the salary, education, and tools they need to change their financial situations.

When your client chooses not to offer financial wellness benefits, they’re choosing not to intervene in the cycle of inequality that affects their employees. As we know by now, not investing in DEI efforts can negatively impact everything from employee retention to recruiting efforts.

Part of helping your clients craft the best benefits package for their employees is giving them the full picture of what they can expect from their decision—both the good and the bad. Hopefully, this article gives you a clearer sense of what your clients lose by choosing not to invest in financial wellness benefits.