Utilizing the right resources

While employers have limited capital to deploy across many business components and may be unsure about how to begin a financial wellness program, or enhance an existing one, trusted advisors and consultants are in a position to provide a variety of strategic solutions.

Employers depend on advisors to unearth their pain points, provide solutions to help them attract and retain employees, and minimize their liability by providing a competitive advantage. One area where an advisor can really make a positive impact on the business and the employees who work there is with a financial wellness program.

Ripple effects of high impact life events

Understanding a client’s internal demographic and the high-impact life events that affect the employee’s ability to be fully present in the workforce is an integral piece of the puzzle. According to a World at Work poll, over 60% of employees believe it is the employer’s responsibility to meet their needs. This encompasses not only their physical wellbeing but their financial, social, and emotional wellbeing.

The following High Impact Life Event chart shows that nearly every event, if not all, affects a person’s financial needs. The connection between the health of an employee’s finances is directly correlated to the financial health of an employer. Yet, so many times advisors consult one-sided to the health of the employer without jumping across the aisle to see the impact an employer's decision has on its workforce.

HIgh Impact LIfe Events.jpg (1700x2200, AR: 0.77)
Understanding financial wellbeing is the cornerstone to advising an employer appropriately. According to the Consumer Financial Protection Bureau financial report, there are four elements to financial wellbeing for an employee:

1. Feeling in control – managing money in present circumstances and the feeling that they are in control of their day-to-day and month-to-month finances.
2. Capacity to absorb a financial shock – this focused on their future security. Having a safety net, such as savings, to meet high-impact life events will ensure they can handle a hurdle downstream.
3. On track to meet their financial goals – an employee might be working towards larger plans, such as purchasing a home or saving for retirement. They need accountability with establishing and succeeding at goal management.
4. Flexibility to make choices – employees need to have control over their spending habits and feel like they are enjoying life day to day, whatever that means to each individual.

In benefit costs analysis advisors should be aware of the cost allocation of health and welfare premiums and its impact on the consumer – the employee and the employer. For those employers covered by the Affordable Care Act, an employer-sponsored plan is considered affordable in 2024 if the employee’s share of the premiums is no more than 8.39% of household income, modified adjusted gross income, as defined in the ACA.
A living wage is what is needed for an individual or family to cover basic needs including food, childcare, housing, transportation, and health insurance. A typical gross-to-net income distribution may look similar to the following living wage breakdown:

• 100% Gross Income
• -43% Housing & Debt (DTI Ratio)
• -30% Income Tax (Est. Federal and State)
• -9.5% Health Insurance Premium
• -10% Savings/Tithing
• + 7.5% Left to Live On

Building a financial wellbeing plan

The financial wellbeing component of having a productive and healthy work environment begins with an assessment of the needs of the employee and the supporting plans that are currently in place. The following diagram provides a starting point for assessing the path to financial success for the employer and the employee.
wellbering.jpg (1035x919, AR: 1.13)Employees are expected to figure out key components of their personal finances with limited to no guidance from their employers. Living in an era where financial stress is pervasive, rethinking workplace financial wellness programs is no longer an option — it's a necessity.

Programs should also looking at offering a range of topics and resources, from basic budgeting and debt management to advanced investment strategies and retirement planning. Ultimately, investing in the financial health of employees is an investment in the long-term success of the organization itself and will foster a more productive, engaged, and loyal workforce. It's time for employers to embrace the transformative potential of truly effective financial wellness programs.

Bobbi Kloss, founder of BK Strategic HCM Consulting, serves as director of Human Capital Management Services to the Benefit Advisors Network (BAN), a national association of independent benefit brokers.