Why Your Business Needs a Financial Wellness Program

We’re nearing the end of 2016 and that means small business human resource departments are preparing budgets for 2017. There are often more needs than dollars and HR departments have never been known for their robust budgets. Despite the stiff competition with health and wellness programs the past few years, financial wellness programs have steadily fought for their share of the pie.

Aon Hewitt’s Report, “2016 Hot Topics in Retirement and Financial Well-Being” found that almost 90% of employers are likely to add or expand an existing financial wellness program in 2016. The number one reason given for doing so was simply “It’s the right thing to do,” but extensive research shows employers, including small businesses, can lose money by not having a financial wellness program.

Delayed Retirement

According to a 2012 survey by AARP, a shocking 70% of Baby Boomers believe they will be forced to delay retirement. Everyone understands the value of having veterans on the team, but aging employees can carry a hefty price tag. The U.S. Bureau of Labor Statistics estimates the average annual health and disability insurance for an employee in their 20s is $3,100. That cost grows to $11,300 for employees over the age of 60. 

The salary differential between the two age groups is slightly more than $12,000 per year.  Employers with an ever-aging employee base are facing rising human capital costs. More dollars are being allocated to a particular subset and employers don’t always have the cash flow to invest in bright new talent with fresh ideas. (For related reading, see: Why People are Delaying Retirement.)

Recruiting and Retention

Traditional financial education programs have focused on financial basics, navigating websites and online tools. But overall these programs need to be more robust. Providing information on a company’s benefits package and offering individual financial consultations with employees has been cited as the preferred process, yet only about half of employers offer it. (For more information, see: U.S. Employee Benefit Trend Study.)

This information has the potential to be invaluable for those trying to navigate pension plans, stock options, restrictive stock units, and other highly customized benefits, and employers actually can save money by spending money on financial wellness programs. The 2015 PWC Employee and Financial Wellness Survey found that employers can save $3.00 for every $1.00 spent. (For related reading, see 7 Employee Benefit Plan Best Practices (BAC).)

Educating employees on the true value of their benefits package can prevent talented employees from being lured away by a job offering a higher salary but lesser benefits. And small business managers and HR staff who learn how to communicate the value of their integrated benefits package can use it to their advantage when recruiting new talent.

Financial Wellness and Productivity

Medical professionals are increasingly attuned to the physical impact of financial stress. Only 20% of Americans smoke and 30% are obese, but 70% are seriously concerned about their finances. Financial stress carries a physical toll. Immediate and short-term effects include memory and concentration suppression, but long-term sufferers have a higher risk of heart disease, stroke and digestive problems. (For related reading, see American Stress Over Personal Finances at Record Levels.)

Fortunately, employers who have successfully implemented a financial wellness program are reporting positive results. Alliant Credit Union’s survey of more than 400 human resource managers reported the following results: 43% increased employee engagement/morale, 40% improved productivity, 40% provided education for employees’ goals, 36% helped alleviate employees’ financial stress, and 23% helped reduce employee absenteeism.

As with other wellness programs, most of the benefits will not be recognized immediately. It takes time to develop and implement a successful program. The 40% of respondents to Alliant’s survey that have already implemented a financial wellness program have a jumpstart toward positive results. Those who choose not to invest in their human capital could face greater challenges down the road with an aging, disengaged workforce. (For related reading, see: How to Maximize Employee Benefits From the Start.)