Financial well-being: A new level of employee wellness
Recently, the concept of employee wellbeing has been almost constantly present at HR events and most of the workplaces. Step challenges, gym memberships—one-size-fits-all programs tried to get employees moving, aiming to improve their biometric scores. However, since then, we have come a long way: now the focus is on the overall well-being of employees – not only on improving their physical health but also on the emotional, mental, and financial well-being dimensions. Stress, workplace burnout and financial worries can be just as damaging to health as obesity or the lack of exercise.
At our very first Salarify meetup, we explored these areas, interpreting them from their experts. In our blog post today, we’ve collected the most important takeaways for you about financial well-being, the newest element of the employee wellbeing programs in 2020.
The must-have component of your program is financial well-being
“The road to financial well-being begins at work. People see their employer as more than just a paycheck. Often, they view their employer as a trusted resource for information and guidance.”
Catherine Golladay, President of Schwab Retirement Services
Our financial decisions affect our performance: our ability to save money, our ability to cover unexpected expenses, but also how much we are present at work.
The most basic level of financial awareness begins with the individual’s ability to control their finances. They are able to understand their basic concepts and goals, and know the steps required to achieve them. If the employer can provide support in doing so, it can be a real advantage over competitors. A healthier employee is less likely to look for a new job.
Raising salaries is not enough.
For employees, financial well-being does not necessarily depend on how much they earn. In addition to their salaries, other factors such as debt, financial management knowledge, savings, the predictability of short and long-term expenses and rising housing costs also affect their financial well-being.
Regardless of generations, employees want to get help with their finances. Nearly 80% of people under the age of 38 want professional help in planning their finances. This figure is close to 70% for the older generation. In the case of retirement assistance, the results are similar, with 74% of the younger generation and 60-65% of the older generation wanting to receive such support. 30% of employees, regardless of generation, find savings and loan management assistance useful.
The critical component: planning
Once employees write down their monthly expenses, their savings goals, and how they will manage them, they can start moving in the right direction. People who have a written financial plan are often better at saving and investing. 78% of ‘planners’ pay their bills on time and save every month. This is only 38% for those who don’t plan. The more conscious group, on average, has three times as much savings as their less conscious counterparts, and they feel twice as financially stable.
It is often the case that employees don’t feel the need for planning because they think they don’t have enough money to do it. However, the truth is, no matter where the individual is on the road to financial health, planning is a basic necessity from the very beginning. Financial well-being support coming from the employer can help getting started with the right tools.
The key to effective financial well-being program: an action-oriented approach
Changing human behavior is not an easy task. This is especially true when it comes to their financial well-being. There can be a big difference between what people want and what they do for it. Through behavioral economics, which is an overlap between psychology, neurology, and economics, we have learned a great deal about the difference between ideas and real action.
What obstacles should you prepare for in advance?
- People tend to choose the simplest option, which often means nothing. We can help this by making the right choice the simplest. If we eliminate the extra steps, we can help our employees move towards the right behavior.
- Decision Paralysis: When an individual has too many options to choose from, they often tend not to make a simple decision. We can help this by giving them fewer options to choose from, so they are more likely to choose
- Decision Fatigue: The more decisions an employee makes, the less likely he or she can make good ones. If we present the most important decisions first, we are more likely to receive positive responses.
Education is not enough to move our employees forward.
It is worth remembering that financial education is fundamental, but in most cases, it is not followed by real action. Our colleagues may simply not know what to do with the material they receive, or they may raise psychological barriers to action. Thus, despite education, we cannot assume that our employees follow good practice. A recent Cerulli report shows that the success of financial wellbeing programs depends on how well we can direct our employees towards action. These changes don’t need to be monumental from the workers’ perspective. For example, an email with a link to access a useful financial tool can help them make the right decision sooner.
Do you feel that it’s time to address the financial well-being of your employees at a strategic level as well? You may be wondering how to start a financial wellbeing program as this is a new field in the HR industry. We’ve already gathered all the steps you need to create a program with a real impact on your employees! Stay tuned, in our next blog post we go deep in the details!