Our recent research spotlights a significant and growing global issue: Financial wellbeing has now become the top challenge employees face. Despite increasing awareness of the challenge and efforts to help employees, organizations continue to report that they aren’t as effective at supporting employee financial wellbeing as they want or need to be.
This is not for lack of trying, as many organizations have implemented programs or vendor point solutions, such as for emergency savings, student loan debt, or financial coaching, as way to bolster employee financial resilience.
However the results of these efforts have been mixed, and most organizations continue to experience poor utilization and a lack of employee understanding and appreciation of the financial wellbeing offering. Further, any ground gained has been worn away by macro headwinds, such as the post-pandemic surge in inflation and rising housing costs. Unfortunately, employees say they’re more financially stressed today than two years ago.
This topic continues to be a business imperative. Data shows a strong correlation between employees’ financial health and their productivity and engagement at work. Supporting employees' financial wellbeing can be a differentiator as companies compete to attract and retain talent. It’s clear that better employee financial wellbeing helps the bottom line. The question is how to develop a financial wellbeing strategy that’s effective and sustainable for the long term.
Financial challenges aren’t uniform across employees. They vary widely based on employee demographics, jobs and geographic locations. Though many employers offer competitive salaries and retirement plans, these programs alone may not effectively address broader financial needs such as the rising cost of housing, emergency savings, debt management and financial literacy.
Moreover, insulating employees against future financial shocks is difficult. At any moment, economic conditions may change drastically, and new financial stresses will emerge. To date, employers haven’t been able to pivot quickly enough to avoid deterioration in the financial health of employees.
It’s crucial to start by thoroughly assessing the current state of employees' financial health. Advanced analytics and diagnostic tools will shed light on the financial wellbeing of your workforce, pinpointing the individuals impacted, including any demographic, socioeconomic, or geographical differences, the severity of their situations and the cause of their financial stress. This necessary step ensures that your solutions are targeted to address key employee priorities for maximum impact.
Once the current state is understood, review pay, benefits, wellbeing and career strategies to ensure they help employees meet basic needs and foster long-term savings.
Areas where these programs can have a meaningful impact on employees’ financial wellbeing include:
Pay: Getting pay right is challenging, but it’s the lynchpin of a successful financial wellbeing strategy. Organizations often focus too much on market competitiveness and broad trends rather than on customizing pay strategies to the unique needs of their workforce and business. For example, how can pay drive affordability and long-term wealth creation for employees, and, in turn, improve retention and productivity?
Organizations can be more effective in several ways, including:
Connecting pay and benefits strategies is a critical part of supporting employees’ financial resilience. Yet many organizations continue to act in siloes.
Instead, organizations should consider:
Beyond core benefits, wellbeing programs play an integral role in employees’ ability to build financial resilience. To bolster the approach, consider the following:
Effective career strategies can complement or detract from the success of a financial wellbeing strategy, particularly over the long term of an employee’s tenure. Organizations that use careers to bolster employee financial resilience:
Beyond programs, organizations should prioritize how they can improve employee financial resilience with more effective engagement and measurement strategies related to their pay, benefits, wellbeing and career offerings.
For example:
Each of the above steps can help your organization turn ambition into reality for employees.
Improving employees’ financial resilience is no longer optional. Our data now shows it’s a business imperative. Nearly 60% of employees globally say that they have poor financial health.
The risks of not getting it right are significant. For example, employees might switch jobs frequently in search of the highest paycheck, creating a drain on productivity and further exacerbating pay-compression challenges that many companies have not yet resolved since the Great Resignation. Coordinating pay, benefits, wellbeing, and career strategies to meet employees' needs for affordability, wealth creation, and financial knowledge is a win-win. It increases employee financial resilience, and in turn provides better outcomes for your business.
