We don’t yet know the full scope of the impact of COVID-19, but nearly two years into this global catastrophe, we can say with certainty that it goes far beyond physical health. People of all ages, genders, races, and religions have been affected by this mass trauma differently, but one area your HR team should monitor moving forward is its impact on your employees’ financial health.
According to a survey from Purchasing Power, nearly half of households (44%) say they are in worse financial positions than they were before the pandemic; another 38% say they have changed their spending habits as a result. And a 2021 PwC survey of American workers found that two-thirds are stressed out about their financial health.
Your company has a vested interest in turning employees’ financial angst into financial well-being. One study suggests that financial stress costs employers about $4.7 billion a week in wasted productivity. It makes logical sense: Stress — financial or otherwise — keeps employees from bringing their best selves to work, which leads to an uptick in unscheduled absences and a drop in on-the-job performance and engagement. In contrast, companies that help cultivate financial wellness in their workforce achieve heightened employee engagement, reduce absenteeism, and boost their team’s productivity.
Common Financial Wellness Programs for Employees
Providing additional financial support doesn’t necessarily mean raising everyone's base salary — though you’ll probably want to conduct annual analyses to ensure you’re paying employees livable wages that match the market average. Instead, think about what financial wellness benefits your employees might need. Here are three ideas:
1. Student loan repayment.
You don’t have to look far to find headlines about the student loan crisis in America. Nearly 50 million Americans have some sort of student loan debt, equating to a combined $1.7 trillion. Each year, 70% of college graduates enter the workforce saddled with an average of $40,000 in student loans, and the U.S. is expected to add more than a trillion dollars in new debt by 2028.
The latest on student loan forgiveness, an issue President Joe Biden campaigned on, is that it’s unlikely to happen on a large-scale level anytime soon. If you remember, the government paused interest and payments for federally held student loans at the beginning of the pandemic, but borrowers will have to restart their payments on May 1, 2022. With many employees already strapped financially, restarting loan payments could put them underwater.
Thanks to the Consolidated Appropriations Act of 2021, employers can make annual tax-free contributions of up to $5,250 to a worker’s student loan debt. The payment is excluded from the employee’s taxable income and could make a real difference in their financial well-being. You don’t need to have a bunch of cash lying around to offer this benefit, either. For many employers, it can be as simple as redirecting existing benefits money to where it can be most impactful.
2. Financial education.
Any employee financial wellness program worth its salt will include some kind of ongoing education around how to handle money. Did you know that nearly 50% of employees are embarrassed to ask for help with their finances — and only 1 in 5 consider themselves financially literate? Unfortunately, money has long been considered a taboo subject in our culture, which means people grow up without understanding how to track expenses and grow their wealth.
Help your team get a firm grasp on personal finance by offering employee financial wellness education. Bring in experts to teach your employees about important topics like retirement planning, budgeting, debt consolidation, etc. Some employers even connect employees with money management professionals through free one-on-one phone consultations. When your employees feel more comfortable navigating the financial space, they’re more likely to take advantage of benefits like 401(k) plans or health savings accounts (HSAs).
3. Emergency savings.
Emergencies are a reality of life. While most financial advisors suggest employee have three to six months' worth of their living expenses saved in case of emergencies, the realities of the today have made households more likely to struggle to make ends meet. Employers can encourage their employees to set aside these funds by sponsoring emergency savings accounts.
An employer-sponsored savings account essentially makes it easy for employees to deduct a set amount of money from their paychecks to deposit into an emergency fund. Employers can also match employee contributions to these funds, though that isn't a requirement. Emergency savings accounts can be a lifesaver for employees who suddenly face emergency expenses, though it's important to note that they do take some time to build up enough cushion to absorb those surprises.
4. Child/elder caregiver benefits.
It's not easy to juggle caring for a child or elder relative, though nearly half of all adults in their 40s and 50s are "sandwich generation" caregivers — taking care of both their own children and their aging parents. In addition to holding down normal 9-to-5 jobs, sandwich generation caregivers spend an estimated 21 hours every week providing care to their loved ones.
Employers who recognize the challenges these caregivers face are beginning to offer child and elder care benefits to employees as a way of giving them some added peace of mind to focus on their careers. Whether they're implementing policies and practices that provide greater flexibility in how and where people work or offering backup care for children or elders, there are numerous ways employers can help workers navigate these challenges.
5. Health Savings Accounts.
Enrollment in high-deductible health plans (HDHPs) has skyrocketed 43% over the past half-decade, largely because HDHPs can help reduce employer costs related to insurance coverage. As an added bonus, they come with the option of contributing to a Health Savings Account (HSA), a tax-advantaged vehicle that HDHP enrollees can use to save for qualified medical expenses.
An HSA can also be used to save pretax funds for healthcare expenses in retirement, with no taxes charged on that growth. And when employees eventually use that money to pay for qualified medical expenses, those transactions are also tax-free. This is what people refer to as the triple tax advantage of an HSA.
While HSAs are great in theory, some employees aren’t financially able to realize the long-term benefits of contributing to an HSA. When employees are unable to contribute enough money to pay for out-of-pocket medical expenses — which most cannot — their HSAs languish and cause them to miss out on the promised tax benefits.
6. Health Payment Accounts.
Paytient offers a new type of benefit known as a Health Payment Account (HPA). Employees can use their HPAs to pay out-of-pocket medical, pharmacy, dental, vision, and/or veterinary expenses, tapping into a small line of credit to cover these costs at the time of service. After each transaction, they choose an interest-free payment plan that fits their budget.
Instead of forcing employees to choose between their physical and financial wellness, an HPA gives them an immediate way to pay for the care they need — whenever they need it. Employees feel secure knowing they have a safety net in their HPA, which makes them more likely to go to the doctor, dentist, or other provider.
Employees haven’t always looked to their employers for financial wellness support, but most folks would welcome the help these days. In fact, PwC reports that 72% of workers are more attracted to companies that care about their financial well-being.
It behooves you to consider how you can promote financial well-being through a robust employee financial wellness program. Use these three ideas as jumping-off points, and watch your team’s financial literacy and well-being grow tenfold.