How is your bottom line linked to your workers’ finances?
5: insights for executives series
Employee stress about money, particularly among millennials, strains companies too, through turnover and loss of productivity. But financial wellness programs can reverse those trends. As the Chief Human Resources Officer at a rapidly growing midsize tech company, Melanie understands how difficult it is to find the right employees and then to keep them.
Her company depends on strong recruiting and retention to meet the needs of its expanding customer base. Turnover can throw projects into disarray and hurt client relations. But each month brings news of more departures.
Melanie’s company is not one that takes its employees for granted — in fact, it has been introducing new or improved benefits, like 401(k) plans with matching contributions, profit sharing, and maternity and paternity leave.
In exit interviews, Melanie hears a recurring refrain: departing employees are out for a higher salary.
Many of them are millennials with a level of college debt that far surpasses anything that Melanie had to confront in her day. Others are older and still trying to get back on track after the fallout of the Great Recession, among other problems.
Melanie understands that they’re under financial stress, although she finds it dispiriting how many of them aren’t capitalizing on the benefits that her company provides. (In exit interviews, some employees didn’t understand such benefits, or even know that they existed).
What’s more, she also realizes that money problems make workers more distracted and ineffective. But what can be done?
If an organization’s success begins with its people, then Melanie knows a change is needed — one that benefits her employees and the company as a whole. And she knows that it must get at the root of the problem: financial wellness.
1. Financial stress among your workers becomes stress for your company
Factoring in inflation, higher-education tuition and fees have surged over the past three decades, especially since 2000, according to 2015 data from the College Board. And The Institute for College Access & Success has found that, in 2014, nearly 7 in 10 seniors from public or nonprofit universities graduated with student debt — totaling a staggering $28,950 each on average.
So many millennials arrive at your workplace already heavily steeped in debt, although, after the worst global economic slowdown in a generation, that can also be true of employees from any age group. In the US, millennials cited “minimal wage growth” as the top reason they left a job, and workers across generations picked “competitive pay and benefits” as what was most important to them, according to EY’s Global generations work-life balance study.
But the issue goes beyond recruiting and retention — it also encompasses productivity and profitability. For instance, recent research from the Society for Human Resource Management found that 83% of HR professionals say financial stress in employees negatively impacted work performance.
In the face of these trends, managing financial stress, and reducing the absenteeism and turnover that stem from it, becomes a business imperative, one that companies can achieve through introducing sponsored financial wellness programs.
2. More millennials and complex benefits drive need for programs
Workforce demographics are changing.
EY’s Global generations study shows that currently the US has an approximately even split among the different generations as managers: 39% millennials, 37% Generation X and 35% baby boomers. That is rapidly shifting: millennials will be roughly 50% of the US workforce by 2020 and 75% of the global workforce by 2030.
Financial decisions around benefit plans have also become more complicated.
Employees have a lot of choices to make — consider how retirement accounts and health care plans have evolved over the past decade and a half. Many find themselves flailing in all the details and end up with a strategy that doesn’t align with their goals — if they have a strategy at all.
3. With less stress, employees have more to offer
Employer-sponsored financial wellness programs should be a crucial part of efforts to boost employee happiness — and thereby drive engagement and lessen turnover — since they target the top three sources of stress cited in a 2014 Harris Interactive poll: money, work and the economy.
And happier employees lead to higher productivity and profitability, reflected in:
- 43% increased productivity (Hay Group)
- 33% higher profitability (Gallup)
- 37% higher sales results (Shawn Achor)
- 300% improvement in innovation (Harvard Business Review)
- 51% lower employee turnover (Gallup)
- 66% decrease in sick leave (Forbes)
And a 2014 report by the federal Consumer Financial Protection Bureau said that financial wellness programs could bring in returns on investment similar to those of comprehensive health wellness programs, totaling $1 to $3 per dollar spent.
4. Employee and employer goals align in a wellness program
Employers and employees both have a lot to gain through programs that support workers as they confront various financial stresses at each stage of their lives. Without much investment, companies can make moves to understand their workforces, what they need and how best to address those needs.
- Analyze your current workforce to understand your generational differences.
- Analyze HR outcomes to determine the level of current financial stress. For instance, you can examine how many people are taking 401(k) loans or having their wages garnished, as well as turnover rates, health care costs, absenteeism and job performance ratings.
- Reconsider your communication strategy to help employees better appreciate, understand the value and utilize benefit plans, thereby having a greater impact on retention.
- Consider the value of building a financial wellness program around these new findings.
Now you have a plan that cuts straight to the heart of what’s distressing your employees the most, allowing them to understand how your company’s benefits connect directly with their needs and giving them more peace of mind.
5. Employees get more out of benefits — and you get more from them
Companies spend a lot on benefits, many of which are meant to address employees’ finances. Yet if they don’t understand these benefits and take maximum advantage of them, you end up with two outcomes: increased employee stress and higher turnover by salary chasers.
Both of these outcomes impact your bottom line.
But, as Melanie’s company learned, a well-planned and executed financial wellness program can significantly improve both outcomes. She found that benefits were being poorly utilized and that pressures from health care expenses merited further changes to the company’s coverage.
Melanie’s company now uses short videos to promote diverse financial education and counseling services, including webinars, a planning website and one-on-one financial counseling. Melanie now feels that, with a bit of education, the company is serving its employees better — and vice versa.