Bottom line benefits: Helping employees cope with financial stress

Between inflation and global instability, financial stress has an unprecedented impact on the American workforce.

According to Bank of America’s 2023 Workplace Benefits report, only 42% of employees describe feeling good about their financial situation—the lowest rate since 2010. However, 96% of employers feel at least somewhat responsible for their workers’ financial wellness, but only 2 in 5 offer financial wellness programs.

The impact has also spilled over to workers’ health, quality of life, and productivity. PwC’s employee financial wellness survey found that employees who had fiscal worry saw significant negative impacts on their mental health (34%), sleep (33%), and self-esteem (30%).

April is National Stress Management Month, and there is no better time than the present for employers to evaluate their current benefits program, consider new financial wellbeing and voluntary benefit offerings, and start a dialogue about longer-term solutions to help better support financially stressed employees.

Taking stock

When addressing employee issues, employers should look inward and evaluate their current offerings and workforce needs before adding new benefits.

By analyzing utilization rates and potential free value-added services included with current benefits, employers can identify where more employee education and communication are needed and where existing solutions can be utilized. In addition, considering how quickly employee needs can change, employers should consider their employees’ current and future needs before making any significant adaptations.

For example, surveying your employees about their short- vs. long-term goals, the benefits they value most, and what offerings meet their current life stage needs provides valuable information to help companies personalize their benefits plans. Also, understanding how unexpected or emergency expenses may impact employees, determining their desired retirement timetable, and gaining confidence in meeting daily expenses are key data points.

Ready to act

Armed with valuable insights, the next step is determining which potential new benefits best meet employees’ needs and plotting that against your business’s bottom line. Currently, some of the most asked-for benefits in the financial wellness space are debt repayment aid (i.e., student loans) and access to advanced planning tools and coaching resources.

With the resumption of federal student loan payments, younger generations once again have greater financial obligations. Employers can take advantage of Secure 2.0 provisions by making matching retirement plan contributions based on employees’ qualified student loan repayments. This encourages employees to participate in the 401k plan while paying off their student loans and creates better savings and retirement behaviors.

In addition, benefit-provided financial management and planning resources have become increasingly prevalent and user-friendly. Online services provide access to budget management tools, debt reduction strategies, and ongoing oversight of assets and liabilities based on users entering personal financial information.

While these digital services are a great place to start, employees are also seeking further support. In Alight’s 2023 International Workforce and Wellbeing Mindset Study, employees were asked what benefits they do not have now but would like, and 87% selected personalized financial coaching. Coaching, an associated expense to employers, can be narrow in scope, focusing on areas like budgeting or student loan refinancing assistance or more comprehensive, including long-term financial and estate planning or tax guidance.

To ensure new programs such as these are utilized to their full potential, you cannot simply “set it and forget it.” Personalized, proactive communication that demonstrates value and visualizes the benefits is essential. In addition, employers may also want to consider incentivizing participation. For example, this can be done with seed money in an HSA or wellness credits towards an employee’s health plan premium. These incentives help integrate financial benefits and behavior with overall wellness.

Raising the bar

In addition to the abovementioned benefits, employers can offset typical employee spending or financial pressures with voluntary benefits, which help workers mitigate high costs associated with unexpected expenses or health care emergencies.

One example is employers offering supplementary hospital indemnity insurance for employees anticipating pregnancy. This provides payment in the event of hospital admittance, which helps to cover deductible and out-of-pocket expenses. Other examples include caregiving benefits, which can reduce financial, physical and emotional stress, or payday loans and payroll deduction purchasing programs that provide access to cash or goods without having to make 401(k) hardship withdrawals or incur high-interest credit card debt.

Staying ahead

The best places to work not only consider what can make their organization better for current employees but also attractive for future employees.

Related: Beyond the 401(k): Financial wellness offerings are a ‘must-have’ for employees

Employers should leverage the valuable insights and resources their existing vendors offer (retirement, physical and behavioral health, EAP, and voluntary benefit services) to stay ahead of the curve.

Another way to anticipate needed changes is to stay up-to-date and anticipate the implications of new federal and state legislation. For example, the state of Washington requires employees to secure a private long-term care policy or contribute to the state plan through a payroll tax, with other states, including California, considering similar mandates.

In practice, this means employees will look to employers to provide cost-effective options to help them satisfy the state mandates and provide attractive benefit alternatives. As a response, new benefits like combined permanent life and long-term care policies are being offered to support employees and their families and help cover expenses related to aging, home health, or care facility expenses.

Financial wellbeing benefits in the future

The future of employer-sponsored financial wellbeing benefits will be characterized by greater personalization, integration with overall wellness, the use of advanced technology, and a broader understanding of financial health encompassing many aspects of an employee’s life. These programs will aim to address today’s immediate financial challenges and focus on long-term financial freedom/security for tomorrow.

Ted Kane is a Partner and employee benefits specialist at Brown & Brown.