Stuck in debt: 3 steps employers can take to help employees achieve financial freedom

In recent years, employees have been increasingly reevaluating what they value in an employer, with many prioritizing working for a company that cares about their financial well-being and one that can equip them with the tools, resources and education to help them understand and manage their debt.

Employers who provide their employees with the tools to manage debt and enhance their financial well-being will likely be rewarded with attracting and retaining top talent. Although offering a robust financial benefits package may be a higher initial cost, many potential payoffs can come from this investment, including reduced company spending on recruitment and lower employee turnover overall.

The following steps can help employers better support employees on their journeys toward managing debt and achieving financial freedom.

#1: Implement financial wellness benefits

 If an employer isn’t already offering its employees financial wellness benefits, now is the time to consider starting. The 2023 Planning & Progress Study from Northwestern Mutual found that more than a third of Americans are carrying close to, or at, their highest level of debt ever – with the top source of personal debt being credit cards. The average American’s personal debt exclusive of mortgages is $21,800.

In many cases, though, credit card debt can be avoided through education and building awareness. For instance, those who are just getting started with managing their finances might not realize how quickly credit card debt can grow and how difficult it can be to pay off.  It can be easy for anyone to fall into the trap of overconsumption and under saving – but financial education and awareness can be very effective in helping people avoid these pitfalls.

To help employees manage debt, companies that aren’t already offering financial wellness benefits can start small by offering tools such as budgeting worksheets and money management apps that can help employees better understand their budget and other financial fundamentals. Another inexpensive benefit is to host financial education sessions for employees during the workday. Whether an employer recruits a local financial professional or utilizes online resources, an educational session can help employees strengthen their financial literacy on debt, as well as other topics such as budgeting, setting financial goals and building good credit.

Other benefits to help employees manage debt include:

• Student loan repayment assistance: The same Northwestern Mutual study on debt also found that 17% of Gen Z and 10% of millennials cited personal education loans as their top source of debt. To help combat this financial stressor, employers can offer student loan repayment assistance through either direct repayment or discretionary programs. Direct repayment programs allow employers to put a set amount of cash payments directly toward an employee’s student loans. A discretionary program allows employees to spend benefit dollars each year on wellness benefits or extra vacation days – or in this case, toward student loan repayments.
• Matching contributions: Like a retirement plan, employers can match a percentage of their employees’ debt repayment contributions to incentivize employees to allocate more of their income toward paying off debt.
• Flexible work arrangements: For smaller companies that might not have the funding to offer direct assistance with employees’ debt, implementing flexible work hours or work locations are low-cost ways to help employees save money on commuting costs. This flexibility is also beneficial for employees who may need to work multiple jobs to help pay off debt.

 #2: Don’t just provide employees with the tools, teach them how to use them

 Even if employers offer a comprehensive financial wellness package, some employees may not reap the full benefits of such a program. It’s one thing for employers to offer the benefits, but it’s another thing entirely to take proactive steps to make sure their employees know how to use them – another thing that can set employers apart.

Employee benefits materials, especially financial packages, are often heavy on financial jargon that can be difficult to understand. Hosting annual workplace benefits seminars to discuss what is being offered, in addition to sending email reminders to employees throughout the year, can be beneficial in increasing awareness and understanding of the benefit offerings. It’s also important for companies to have a designated benefits point person, such as a human resources specialist, who employees can feel comfortable asking questions.

#3: Offer individualized financial counseling  

If an employer already provides companywide financial wellness benefits and has the budget to take these offerings to the next level, employer-provided financial advisors have the potential to make a significant long-term impact on employees’ overall financial well-being.

For example, a financial professional hired through an employer has the advantage of understanding the unique offerings of the company, while providing each employee with financial advice catered to their unique needs. From debt reduction strategies to retirement planning, advisors can help employees feel more confident about their financial future. Financial advisors can also be beneficial in assessing an individual’s current level of financial understanding, and, from there, helping to increase the employees’ knowledge of fundamental financial principles.

Related: Problematic debt: Why 40% of workers can’t participate in a retirement plan

While it’s commendable for an employer to assist its employees with debt management, the benefits won’t be fully realized unless employees know what the benefits are, how to use them and have access to individualized, tailored support.

Financial advisors can be a true partner throughout this process, especially those who specialize in helping business owners create customized financial wellness benefits packages based on their unique circumstances. From there, advisors will work with employers to ensure their employees are receiving the education and tools they need to take full advantage of these benefits.

Zakry Levitt is a private wealth advisor at Northwestern Mutual’s Gould Financial Group.