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How to engage employees with financial incentives

Dan Eck

EY US Managing Director of Group Learning

6 minute read 25 Apr 2022

Employees across all generations are seeking deeper guidance in their financial planning.

Defining “financial wellness” is often hard to pinpoint given the meaning and application is dependent on the stage of each individual’s financial journey. Ernst & Young LLP’s EY Navigate practice defines financial wellness as the ability to make confident, well-informed money-related decisions resulting in financial security for both the short and long term. Encouraging positive financial habits is foundational to financial wellness and can be driven through personalized learning paths, access to trusted resources and targeted communications designed to engage individuals when they need it most.

How EY can help

While the emergence of technology-based financial guidance solutions  can provide a structured approach to financial planning, employees across all generations are seeking deeper guidance. When it comes to urgent personal financial decisions, employees need access to human interaction from a trusted resource. Live conversations with a financial planner uncover an individual’s level of confidence in money matters and financial habits, leading to a deeper level of guidance that tech-only solutions simply cannot provide.

 

To support our finding, Ernst & Young LLP’s Financial Wellness Assessment study identified that while 74% of employees feel their debt is manageable, 50% of employees still spend time worrying about their financial situation.

 

Having access to an objective, trained financial planning professional to discuss personal situations helps employees overcome those financial stressors.

Ernst & Young LLP’s Financial Wellness Assessment study identified that while 74% of employees feel their debt is manageable, 50% of employees still spend time worrying about their financial situation.

How are you feeling … financially?

The study also asked individuals to indicate how they felt about their financial lives on a scale of 1 (extremely unwell) to 10 (extremely well). Two-thirds of respondents rated themselves at 7 or lower. While some fall high on the scale, many more feel financially unwell. And, that’s a problem for employers, as stress can lead to loss of productivity in the workplace or even an increased chance of workplace injuries due to distraction.

When asked to indicate how they felt about their financial lives on a scale of 1-10 (extremely unwell - extremely well,) two-thirds of respondents rated themselves at 7 or lower.

Engage employees with financial incentives

An ongoing trend in wellness programs is the use of employer-sponsored financial wellness incentives. Previously, incentives for wellness programs primarily focused on employee health programs. Employers with those programs offer incentives such as health care premium reductions and Health Savings Account (HSA) contributions to improve personal accountability, encourage healthier lifestyles and minimize health stressors.

But employers are also now offering financial wellness incentives in the form of identity theft protection services, tax preparation support, financial planning and student loan repayment programs to help employees across all career stages. Some are even considering supplementary contributions to 401(k) accounts. We expect this trend to grow, particularly in the case of student loan repayment programs (given the average student loan debt has doubled since 2007) and for financial planning (as employees bear more responsibility for benefits-related financial decision making).

At the same time, employers are finding creative ways to encourage utilization of financial wellness programs, from traditional communications to direct incentives. These include offering reward program credit for calling a financial planner or utilizing a wellness tool or website, or giveaways for attending financial education sessions.

Employees facing tradeoffs when deciding where to invest

Saving for college continues to be a challenge for families who know tuition bills are looming but aren’t sure how, or where, to save. Of participants who took the EY Financial Wellness Assessment, and for whom college savings for a dependent was a goal, 43% did not feel they were setting aside enough money. For many families, saving for continually escalating tuition costs comes at the expense of other important savings goals, including retirement funding.

For younger employees, having to prioritize paying off student loans over saving for retirement means time and money lost as they sacrifice the additional value compounded savings brings to retirement contributions made in their early career years. Just as employers are seeking solutions to enable healthy work/life balance for their employees, so too must employees actively participate in finding the right short- and long-term solutions to enable individual financial goals.

The good news

Yet, for those who completed the EY Financial Wellness Assessment, there is hope when it comes to planning for future financial health. Seventy percent of respondents indicated they have never paid a bill late. This, in turn, positively impacts personal credit scores and the ability to borrow money at more favorable interest rates.

70% of respondents indicated they have never paid a bill late.

Further, 90% of respondents say they are containing their spending and not exceeding their net take-home pay. This is good news as less debt accumulation and improved cash flow could free up money to fund future goals, including college tuition and retirement. It’s also an indicator that better short- and long-term goal planning can result in healthier spending and saving habits which, in turn, impacts confidence and overall wellness.

Investment education and guidance on the importance of diversification has led to another trend: more balanced investment strategies and less concentration in company stock. Vanguard found that 76% of plan participants had a balanced investment strategy compared to 37% in 2004, only 3% held no equities and just 4% had over 20% allocated to company stock. The EY survey found nearly 8 in 10 respondents report they now have less than 25% of their money invested in cash and money market vehicles. A full one-third of employees say they are not investing in short-term instruments at all. Retirement is the primary focus for most EY Navigate users, and while investing in the stock market can lead to higher short-term volatility, over time, these investments have outpaced short-term and money market positions and provided a hedge against inflation.

90% of respondents say they are containing their spending and not exceeding their net take-home pay.

The financial wellness journey

Achieving a strong financial life, much like achieving a strong physical life, requires building habits that enable healthy lifestyle choices. As the trend for adding a financial wellness service to the suite of workplace benefits grows, employers are seeking solutions that provide a structured approach to financial planning in combination with personal guidance from a trusted resource.

And, while calculators and robo-tools can provide an indicator for a point-in-time, positive changes in financial behavior come through long-term, guided planning to encourage confident, well-informed decisions that drive financial security for today’s needs and tomorrow’s goals.

Getting in front of employees with targeted education, access to personalized learning paths and support from trained financial professionals ultimately leads to employees who are engaged in their financial lives. As employees become active in financial planning, they build the confidence they need to continue their financial wellness journey.

Summary

Ernst & Young LLP’s Financial Wellness Assessment study indicates how employees feel about their personal finances, debt and financial incentives, and the kind of guidance they need to make financial decisions.

About this article

Dan Eck

EY US Managing Director of Group Learning

EY Executive Director in Columbus with a passion for empowering individuals to improve their financial future. Musician, father and treasurer for many non-profit organizations.

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