Financial wellbeing, according to the Consumer Financial Protection Bureau, centers on the ability to afford necessities, meet family obligations, cover reasonable financial emergencies, and save for retirement.
(April, 2020: Hundreds of cars line up in Pittsburgh for food distribution event)
While few would argue with this definition, roughly half of workers before COVID-19 did not meet that standard. Now, financially stressed workers are skyrocketing as the COVID-19 pandemic and resulting job losses and cutbacks has made “personal finances” American workers’ dominant concern.
According to MetLife’s 18th annual U.S. Employee Benefit Trends Study (EBTS), 52% of US workers are most concerned with their financial health in the wake of the COVID-19 pandemic, far more than any other aspect of their wellbeing, with 3 in 10 (29 percent) now earning less as a result of the virus.
A Tale of Two Economies
Before COVID-19, the US economy boasted favorable economic indicators, record low unemployment, and a rising stock market. Yet, a majority of American workers were falling behind and struggling to afford essentials, with 67% of employees reported feeling stressed about the finances, according to PwC’s 2019 employee financial wellness survey.
The cause? Decades of tepid wage growth, irregular work schedules and fluctuating paychecks, and inadequate or nonexisting employer benefits that disproportionately hurt lower and middle-income Americans who live paycheck to paycheck.
As a result, many American households endure a never-ending struggle to afford necessities, fund retirement savings and cover medical emergencies because of high deductible health insurance plans with four of 10 adults lacking the resources to cover an unplanned $400 expense.
The Costs of Low Financial Wellbeing
Low financial wellbeing not only hurts employees’ mental and physical health;
it decimates employers’ bottom lines. Research shows that employees with low financial wellbeing can cause:
- High Presenteeism: 5x more likely distracted at work (PWC)
- Low Productivity: $3.3 Million/yr loss for employer of 10,000 (PWC)
- High Absenteeism: Twice as likely for financial issues (PWC)
- Twice as likely to be in poor health (Willis Towers)
Low financial wellbeing contributes to physical health issues, including heart disease and diabetes, mental health issues like anxiety disorder and depression, and higher rates of alcohol and substance abuse.
Financial stress also breeds distracted workers. Low financial wellbeing hurts engagement and productivity as employees all-to-often worry about their finances, or are on the phone, emailing or texting about financial issues.
Getting Through The Crisis
Given the worsening state of employee financial wellbeing, employers need to help employees feel more secure about their finances, not just for the employees’ good, but for employers’ good.
“The coronavirus is contributing to employees’ overall stress, especially as it relates to their financial well-being,” said Todd Katz, executive vice president, Group Benefits, MetLife. “This is particularly true among those with incomes below $50,000, and those in healthcare.”
This provides an opportunity for employers to help employees meet this challenge while bolstering engagement and loyalty from the workforce.
Yet, the Metlife study shows that 41 percent of employees feel their employer is not offering benefits or programs that help support or improve their well-being during this challenging time.
“Across industries, employers have an opportunity to be a source of support for employees facing unprecedented challenges by offering tools and resources to address their immediate concerns,” says Katz.
Listen and Assess
First, learn what employees need. Conduct a company-wide financial wellbeing assessment about employees’ top financial challenges to inform a strategic plan to help employees through these tough times.
“Actions taken in the coming weeks – the words you say, how you handle difficult news – will be part of your employer brand for years to come,” says Karolyn Karl and Mark Smrecek on a recent Willis Towers Watson blog post.
“If you want to know what employees are most concerned about and how you can best support them, there’s a sure way to find out – ask,” said Karl and Smrecek. “In the last few weeks, we’ve seen some of our highest participation rates in these employee listening activities. Employees want to be heard, and speaking up when you ask their opinion is something they can control.”
Be A Resource
Many employers have cut hours or furloughed employees. And while federal, state, and local governments established relief programs for needy individuals and families, many employees are finding it difficult to plan their next moves.
Help employees understand what’s available, inside and outside the company. Segment your approach to the needs of lower-paid and middle-income workers and communicate about existing benefits, or help employees establish peer support networks to help one another inside or outside work.
Maximize Financial Wellbeing Programs
While more employers have adopted financial wellbeing programs, most skirt the genuine cause of low financial wellbeing—a lack of money.
While low financial wellbeing can exist at any income level, employers should focus on low to middle-income employees who’ve suffered decades of wage stagnation, gutted retirement plans, and higher out-of-pocket healthcare costs.
Wherever possible, find creative ways to support employees who may be financially struggling. Create new programs that reach the lower-paid (bottom 40%) employees who form the backbone of many companies.
Help cover costs related to working from home, expand childcare support, or offer free access to mental health services via phone. Help financially struggling workers deal with the crisis and keep more money in their pockets.
Learn your local living wage with websites like MIT’s Living Wage Calculator. If you discover you’re paying anyone less than a living wage, decide whether that makes sense, given that low financial wellbeing is detrimental to engagement, productivity and other bottom-line measures.
Leading Through the Crisis
Given these challenging times, many CEOs and company leaders might not focus on employee financial wellbeing. That’s a mistake.
Throughout this crisis, employees need to know their leaders are focusing on employees’ needs, not just the company’s bottom line. HR must play the role of communicator and facilitator between C Suites and workers, making sure the right messages reach employees at the right times.
The actions companies take in the coming weeks, the words you say and the way you handle difficult and developing news will all be part of your employer brand for months – and possibly years – to come.
According to a BenefitsPro interview with Neil Lloyd, who heads Mercer’s US DC and financial wellness research, employers need to look at the COVID-19 crisis in stages, the first of which is all about staying afloat day-to-day.
As the workforce gradually returns, Lloyd believes there will be opportunities for major reinvention. And executives are developing a new understanding that “If you look after your people well, they will ultimately look after you.”
Both during and after this crisis, employers must rethink and prioritize financial wellbeing as an investment in people that boosts profits, productivity, morale, and lowers turnover and healthcare costs.
Soon, employers should consider the case for boosting employees’ financial wellbeing by paying living wages, lowering health insurance deductibles, and providing subsidized childcare.
This can also include helping employees budget, save and manage debt, introducing an emergency savings account option to cover unexpected events, or even buy their first home, establish emergency funds, automatically enroll staff in retirement plans, and open benefits up to all family members.
“I think this is a time when you can look back at your benefits and say, ‘Well, given what we just learned, is there a better way to structure benefits that meet the needs of people?’ ” Lloyd said. “Because this is going to be in people’s minds. They’re not going to forget it in six months’ time.”
