Financial Wellness Benefits Boost Employee Happiness and the Bottom Line 1 Nearly half of employees surveyed by Mercer said they spend 45 minutes of their workdays dealing with personal finances.1 Why Happiness Can Impact the Workplace A growing body of research has given credence to a theory that most employers have long known: Happy employees tend to be more productive, more creative and more supportive of their peers. Yet, an endless supply of cold brew coffee or flexible work hours do little to resolve one of the biggest causes of unhappiness — financial stress. Employees are looking for help solving day-to-day money concerns, such as how to manage student loan debt, or how to balance saving for retirement and putting away money for their children’s education. Finances are a major cause of stress for employees, and that has implications for employers’ own bottom line. Despite the broad economy being relatively healthy, the number of employees stressed about their financial situation jumped to 67% in 2019 from 47% the prior year, according to PricewaterhouseCoopers’ (PwC) 8th Annual Employee Financial Wellness Survey.2 2 Organizations need to look at benefits from many different angles, beginning with the areas that tend to be the biggest source of employee stress — finances. Financial wellness benefits vary greatly by employer but often address issues related to budgeting, debt management or education savings. They often compliment traditional workplace benefits, such as healthcare and retirement savings plans, and can ultimately help reduce employee stress while improving overall morale and office culture. In the end, there is a strong business case for employees’ financial wellness. One 2017 study from the Center for Financial Services Innovation called “Employee Financial Health: How Companies Can Invest in Workplace Wellness,” found that administrative costs for an employee in good financial health were $2,000 lower than their counterparts in a vulnerable financial state.3 What are financial wellness benefits? Financial wellness benefits are wide-ranging, but typically fall into three broad categories: • Services that include financial counseling, debt management services, credit repair and tax preparation • Products and tools such as savings and checking accounts, retirement accounts, cash flow management tools and student debt payment options • Education, including personal finance seminars, online learning and webinars 3 Happy Employees are Better Employees Happiness plays a significant role in how employees perform in their everyday roles and relationships, and in turn can affect overall productivity and morale. When positivity is the rule rather than the exception, studies show, productivity and creativity levels also increase. As such, the subject of happiness is garnering increased attention among major organizations and academics. “People who cultivate a positive mind-set perform better in the face of challenge,” writes Shawn Anchor, author of “ The Happiness Advantage: How a Positive Brain Fuels Success in Work and Life,” in an article published in the Harvard Business Review.4 In a wide-ranging meta-analysis of 225 academic studies, Anchor found strong evidence of directional causality between life satisfaction and successful business outcomes. “The habits you cultivate, the way you interact with coworkers, how you think about stress—all these can be managed to increase your happiness and your chances of success,” he observes. Based on his research, every business and educational outcome showed improvement when people had a positive mindset. “Sales improve 37% cross-industry, productivity by 31%, you’re 40% more likely to receive a promotion, nearly 10 times more engaged at work, live longer, get better grades, your symptoms are less acute and much more.”4 4 49% 80% of those who responded of those who responded reported that Millennial reported that their student loans employees have have a moderate or significant student loans.2 impact on their ability to meet their financial goals.2 Financial Stress Undermines Happiness In 2019, the U.S. economy was thriving, yet a Difficulties managing student loan debt can spill growing number of employees reported feeling over to other aspects of employees’ lives, making it stressed about their finances. In 2020 the COVID-19 challenging to juggle other expenses and financial pandemic caused unemployment rates to fluctuate priorities, such as buying a home and saving for drastically, and employees began feeling the impact retirement. Just half (49%) of all adults say they are of financial stress more so than before. either very confident or somewhat confident that they can pay off their student loan debt, according to The results of PwC’s most recent Employee Financial new research from CFP Board in collaboration with Wellness Survey underscores the prevalence of these Morning Consult.5 Because of student loan debt, only concerns. When asked what they feel causes them 26% of all adults say it is very likely they will fund their the most stress, more employees cited financial retirement account and only 24% say it is very likely matters (59%) than any other life stressor –– including they will purchase a home.5 job, relationships and health concerns combined.2 Given the impact of student loans on employee Student loans are a major culprit. “The burden of financial well-being, some employers (albeit a small student loans continues to hinder employee but growing number) have started to embrace financial wellness. Nearly half of all Millennial student loan repayment benefits as a way to help employees have at least one student loan, and 80% their employees and retain talent. of them say that their student loan is impacting their ability to meet their other financial goals.”2 Student Many employers, on top of their student loan debt is a burden for older generations as well, with repayment benefits, are helping fund the education 26% of Generation X employees and 10% of Baby for future generations. The PwC report notes that 49% Boomers still paying on these loans. “Employee of employees intend to fund education expenses anxiety will continue to mount without a greater for their kids and grandkids, while 29% plan to fund emphasis on increasing savings and improving education expenses for themselves or longer-term financial well-being,” the PwC a spouse/partner. study notes.2 5 35% 49% percentage of employees percentage of employees say that that report issues with they spend three or more hours personal finances have been at work per week thinking or a distraction at work.2 dealing with issues related to their personal finances.2 Stress Carries a High Cost Just as happiness can boost employee productivity, the opposite also holds true. According to a 2017 survey from Mercer, employers can lose up to $250 billion a year due to employees’ stress about their finances, alone.1 This survey found there is a real risk when employees spend time worrying about their finances. At any given time, approximately 5% of an organization’s total payroll is at risk.1 One explanation is that stressed employees are more likely to be distracted and less productive than other employees. They are also more likely to leave for another employer that cares more about their financial well-being. PwC’s report found that employees who are stressed about money are nearly five times as likely to say that their finances have been a distraction at work.2 6 Financial Wellness Benefits Bridge the Gap Now for some good news: Employers can play a meaningful role in helping employees improve many aspects of their financial lives. More employers are offering a wide range of benefits designed to help employees manage many aspects of their financial lives. In 2019, 11% of employers offered payroll deduction for a 529 tax-advantaged education savings plan, according to the Society for Human Resource Management.6 What’s more, the percentage of employers offering student loan repayments doubled from 4% to 2018 to 8% in 2019, and potentially up to 21% in 2021.7 Financial wellness programs have already proven popular among employees with access to them. In the PwC survey, 71% with employer-provided services said they’ve used the benefit, and those numbers have increased in recent years, particularly among Millennials and Baby Boomers.2 Nevertheless, employees would like to see more benefits added. Among Millennials, student loan repayment benefits were a top request, with 37% indicating they’d like to see the benefit added.2 What employer benefits would you most like to see added in the future (if you do not already have it)?2 27% 26% 17% 16% 8% 6% Financial Student loan Help Identity theft Mobile access Other wellness benefit repayment understanding and credit to benefits with access benefit and using protection to unbiased benefits counselors Proposed legislation could give employer student loan repayment benefits a boost. Under the current law, student loan repayments are considered taxable income, but that could change soon. The proposed Employer Participation in Repayment Act would allow employers to voluntarily give tax-free student loan assistance up to $5,250 a year, per employee. 7 STUDENT LOAN COLLEGE GRADIFI PayDown SaveUp Refi Direct contributions Direct contributions Student loan to employees’ to employees’ refinancing at student loans 529 savings plans competitive rates Gradifi Takes the Guesswork out of Financial Wellness To help employees make the most out of their financial wellness benefits, employers will want to be proactive about educating employees on the benefits and nudging them to utilize the benefits. Nudges are a concept emphasized by Richard Thaler, a winner of the 2017 Nobel Prize in Economics. His co-authored book with Cass R. Sunstein, “Nudge: Improving Decisions About Health, Wealth, and Happiness,” outlines how financial paternalism can influence better choices, and ultimately help “make their lives longer, healthier and better.” Consider the impact of auto-enrollment and auto-escalation of employees’ retirement plans.