Why your clients’ benefits package needs a financial wellness component
What inventive benefit packages can you offer clients to help employees address these challenges and, more importantly, regain their financial footing?
As those financial concerns grow, they can significantly impact employees’ work performance, personal lives and future plans. And nearly all employees (93%) are looking to their employers for financial wellness support. The question becomes: What inventive benefit packages — from financial education and resources, to loan repayment support and financial counsel — can you offer clients to help employees address these challenges and, more importantly, regain their financial footing?
By the numbers: Inflation’s impact on employees
Let’s start by taking a closer look at some of what’s causing these money woes — and the effect it’s having on employees. Not surprisingly, Americans say their top concern is paying for housing and everyday expenses:
- Home prices are still up nearly 11% from last year, and higher interest rates are having a brutal effect on the housing market. This is driving up the cost of home-buying by hundreds of dollars each month and pummeling demand.
- Additionally, rent prices for single family homes swelled during the first half of 2022, hitting a national average of $2,495 a month — a 13.4% increase compared to the same period in 2021.
- While fuel prices have recently dropped nearly 20% from a US national average high of $5.08 per gallon in June, the current average ($4.08/gal) is nearly double what it was in 2020.
- Food prices jumped 13.1% in July, the biggest one-year increase since March of 1979.
As debt continues to rise, so do financial shocks, which Pew defines as a significant loss of income or a major unexpected expense, such as a trip to the hospital or a significant auto repair. In fact, 60% of Americans experience financial shocks and one-third experience two or more per year. This puts more financial pressure on American families, nearly 70% of whom don’t have emergency savings. These costs are typically around $2,000, representing half a month of income for the median household.
The impact on employees is evident. A new survey by financial services provider SoFi found that slightly more than half of employees are more stressed about their finances today than they were during the height of the pandemic and spend around 25% of their work week dealing with financial issues. The irony behind this brewing concern? While the majority of employees are feeling financial pressure, only 13% of the workforce says they can talk openly about money at work and get the help they need.
One person who has helped employees battle this double-edge sword of debt is Cynthia Campbell, Chief Experience Officer at BALANCE, an organization that provides comprehensive financial counseling and education services.
Campbell explains how this prolonged bout of inflation has tripped people up. “We saw consumers use credit as a ‘safety net’ during the pandemic when job losses were high. Now, even though we report low unemployment, the average family is still struggling, as inflationary prices on gas, groceries, clothing, etc., takes a toll on the household budget. People are turning to credit again, but now interest rates have risen, making that credit more expensive. The monthly minimum payment increases as the balance rises but the budget has no room for it.”
According to an August 30 report from the Federal Reserve Bank of New York, the average credit card debt held by households in the United States surged by 13% in the second quarter, the largest increase in such debt since 1999.
Campbell says that for many, the main challenge is often just admitting they need some help. “It’s hard for some to reach out and ask for guidance. But when people bring these financial issues into the light and share the burden of that stress with another person, there seems to be a relief that comes over them.”
Financial counselors can then work with employees to co-create a plan to tackle the specific financial issues they face, from debt and student loan repayment to restoring their credit score and preparing for a more stable financial future.
“Employers underestimate the impact that financial stress has on their employees. If an employee is stressed out about their financial situation, they are not going to be fully present at work. They may think they need a job that pays more too,” she adds.
Campbell suggests that it’s in employers’ best interests to care about the financial well-being of their staff, just as they do their physical and mental wellbeing. “Today’s job seeker is looking for an employer that cares for their ‘whole person’ and allows them to bring their true self to the workplace.”
On the front lines of financial stress
For several years, I’ve worked with Jeff LeMay, the Director of ARAG Customer Care and Claims. He oversees a team of Customer Care specialists who are on the front lines, so to speak, of addressing members’ concerns and requests for legal help – many of which actually start out as financial challenges.
LeMay notes, “Members with questions about filing for bankruptcy are pretty common. Often, they don’t know if filing for bankruptcy is the right option; but they’re anxious because they’re drowning in debt and don’t know what else to do.
“We’re also hearing from employees who are having trouble paying back their college student loans. We expect this to be an even bigger issue in 2023, as federal student loan forbearance — essentially a pause in payments — is scheduled to end December 31.”
Other financial insecurity catalysts revolve around housing concerns and unexpected health care costs. “Members want legal help because of landlords increasing their monthly rent and the member now can’t afford the new rate,” LeMay says. “Some members also face unexpected medical bills that they can’t pay, which can eventually lead to debt collection.”
Employees who are considering taking major steps, like debt consolidation or bankruptcy options, require reputable financial and legal counsel to:
- Understand what each option entails
- Know their short- and longer-term implications, and,
- Find budgeting strategies to keep moving toward financial health
“Many Americans are in a world of unknowns and there’s a lot of anxieties,” LeMay adds. “But once they have a resource to go to — and they’re on a path to help resolve their issues — it’s a great relief because it takes the burden off of them, financially and emotionally.”
Discover what’s hidden in current benefit offerings
Part of the solution to help employees improve their financial wellness may be right in front of you. Start by reviewing your clients’ existing human resources programs and employee benefit resources that can be leveraged as part of your financial wellness program. For example, your organization’s financial, banking or life insurance partners may have tools, programs or websites designed for your employees that you may not be fully promoting. This could include financial education opportunities through a retirement plan.
But think outside the box
Consider what benefits could supplement your existing programs and help employees get a leg up on the financial wellness ladder. This could include offering benefits like:
- A student loan repayment plan. This is a program designed to help employees break free from college loan debt and focus more on savings goals. An unfortunate reality is that nearly 15 million millennials carry student debt, more than any other generation, meaning employer-sponsored loan assistance is greatly appreciated.
- Emergency savings accounts (ESAs). These “rainy day” accounts allow for automatic deposits through payroll deductions and are designed to encourage healthy saving habits. Unlike 401(k) accounts, ESAs are taxed as income and are accessible, as needed, without penalty. ESAs provide short-term cash that may help protect long-term savings in retirement accounts.
- Salary advance. As the name implies, salary advance benefits offer employees access to the pay they have earned before the customary payroll cycle. While not addressing the underlying issue of living paycheck to paycheck, they can help employees avoid pricey payday lenders, late charges, and bank overdraft fees.
- Legal insurance. For employees dealing with significant debt or financial issues, a legal insurance plan could also be a valuable asset, providing affordable access to legal counsel that helps them understand their options as well as the short- and long-term implications of their financial decisions. Like some insurance providers, legal insurance companies may offer members access to a financial counselor for one-on-one advice.
By examining new and existing avenues of financial wellness benefits, you’ll increase the overall value and appreciation of your clients’ offerings, which can be particularly impactful in these economically volatile times. Plus, the enhanced benefits will speak volumes to employees looking to employers for support in addressing their financial challenges. Reducing employees’ financial stress and insecurity and boosting overall wellness amounts to a win for them and ultimately your clients.
Dennis Healy is a member of the ARAG® executive team. He is a passionate advocate for legal insurance because he has seen firsthand how it helps people receive the protection and legal help they need. He has more than 30 years of insurance industry experience, with a primary focus on the sale of group voluntary benefit products to employer groups of all sizes through the brokers and consultant community.