As financial stress rises, they look to the benefits portfolio for solutions
by Mike WilbertMr. Wilbert is chief revenue officer at Purchasing Power, a voluntary benefit provider. He has 30 years of experience in the insurance and voluntary benefits industry.
Employee financial stress is not a new topic. Much attention has been drawn to employees’ financial stress in the past few years, including its effect on job performance. Prior to the pandemic, 74% of full-time employees reported that they would experience financial difficulty if their next paycheck was delayed for a week, according to the 2019 “Getting Paid in America” survey by the American Payroll Association.
When the COVID-19 pandemic came along, many employees saw their financial situation worsen and their financial stress rise even more. Layoffs and furloughs occurred at many businesses and organizations and at massive levels in some industries. Although some employees continued to receive their usual compensation, spouses and partners might have been impacted which then turned that household’s financial stress up several notches.
With the pandemic winding down (finally!) and the new year nearly here, what do benefits brokers and advisors need to know about the current state of employees’ financial stress? And how important are financial well-being benefits to employees?
Financial Effects of the Pandemic
Household income levels don’t discriminate. During the pandemic employees at every income level saw their financial situation take a dive. In fact, according to The State of Employee Finances: 2021 based on a Harris Poll on behalf of Purchasing Power, nearly half of full-time employees in all household income levels said their financial situation was worse in February 2021 than prior to the COVID-19 pandemic. That includes 44% of those making $75,000 to $100,000 and 41% with household income over $100,000.
What Are Employees Worried About?
Financial stress levels are on the rise. Now more than a year into the pandemic, 95% of the Harris Poll respondents said they have financial stress.
When asked what they are worried about, two of the top three items on their list are financial well-being-related:
- 37% are worried about having enough in emergency savings to cover unexpected expenses, such as car repair, home repair, a broken appliance, etc.;
- 35% are worried about not having enough retirement savings; and
- 34% worry about their mental/emotional health as a result of the COVID-19 pandemic.
What 2022 Will Look Like?
Finances are expected to improve in 2022, but not stress levels. According to the Harris Poll, while over half (52%) of employees said their household financial situation will be better by January 2022, 51% also anticipate that their financial stress level will be the same or worse than it was at the beginning of 2021.
Financial stress is an important factor for clients of benefits brokers and advisors. Employee financial stress impacts the employers’ bottom line through increased healthcare coverage costs, loss of productivity and decreased employee retention rates. Employees answering the Harris Poll readily admitted how their financial stress affects them on the job:
- 33% said it affects their physical health;
- 24% said it affects their ability to focus at work;
- 21% said it affects their productivity at work; and
- 21% said it affects their job satisfaction.
Smart companies realize the potential impact of employee financial stress and are seeking effective ways to help employees. Benefit brokers should advise their clients to offer robust financial wellness benefits that can provide a lifeline during these difficult times.
Financial Well-Being Benefits Matter
Much is being written right now about The Great Resignation which began in Spring 2021. This spike of employees voluntarily leaving their jobs arose in response to the COVID-19 pandemic. Employees aren’t leaving the workforce. Instead, they are seeking better opportunities and accepting new jobs and it’s not really about money. They are going to new jobs where they will have more family time, a better work-life balance, and where employers value them more. Employees really want to know their employers care about them. Employees have been clear that one way for employers to show they care is by the benefits they provide – especially financial well-being benefits.
According to the Harris Poll:
- 78% of full-time employees reported that they can tell how much their employer cares about their financial well-being by the benefits they offer; and
- 79% said they would be more likely to stay with their present employer if they offered more financial well-being benefits.
That’s a pretty strong statement. Living paycheck to paycheck has been an issue for many employees for some time now. The pandemic just took it to a higher level. The solution isn’t about making more money or having more credit cards and loans to cover expenses. Financial security comes from using the money in a paycheck wisely – being able to pay bills, handle emergencies and plan for retirement. Some of the ways employees can do more with their money include following a monthly budget; being wise shoppers; utilizing employer-offered financial wellness tools and taking advantage of voluntary benefits that help their financial well-being.
In the Harris Poll survey, employees were asked their preferences for some of the financial well-being benefits that benefit brokers can assist their clients in adding to the employee benefits package. Here is the list and the percent of Harris Poll respondents expressing an interest in those benefits:
- 28% – employee purchase program;
- 27% – bill payment program;
- 24% – financial counseling;
- 24% – low interest installment loan;
- 23% – identify theft protection;
- 20% – medical deductible financing; and
- 15% – student loan repayment benefit program.
In reality, it’s going to take time for employees’ financial situation to improve and recover. But employers can build further appreciation, job satisfaction and loyalty as they provide more support to their employees with financial well-being benefits that offer tangible assistance. This is a prime opportunity for employers to help employees put their financial lives back together again.