The business case for financial wellness programs

on July 15, 2022 / by Financial Mindfulness

The business case for financial wellness programs.

Financial wellness has been a buzzphrase in the workplace for many years, with good reason.

More and more data are showing employee financial stress decreases productivity.

In Australia, AMP’s 2020 Financial Wellness Report showed 1.8 million Australian workers suffering prolonged financial stress, costing $31 billion in lost productivity.

The 2022 PwC Employee Financial Wellness Survey covered 3,000 full-time employed American adults. They found two out of five full-time employees said their top financial pressure is that everything costs more these days, and financial stress can run deep.

Addressing those concerns and improving the work environment for your employees often requires a better understanding of three critical areas that significantly impact an organization’s culture and, ultimately, business success.

Retention: Financially stressed employees are twice as likely to seek a new job. Employees looking for a new job deal with critical cash and debt issues and are less confident that their current employer cares.

Mental health: Financially stressed employees are three times as likely to feel a big negative impact from money worries. Employees are six times more likely to say that financial stress has severely/majorly impacted their productivity at work and twice as likely to be looking for a new job.

Productivity: Financial stress has multiple ripple effects. Among employees who say that their financial worries have had a severe or major negative impact on their productivity at work, 67% are struggling to meet their household expenses on time each month, 71% have personal debt, and 64% are using credit cards to pay for necessities they couldn’t otherwise afford.

The United States is, of course, a different market, but the underlying principles apply to Australia: financial stress affects employees’ health, productivity and retention.

The cost of living in Australia has escalated at a record-breaking rate as inflation bites. Interest rates are increasing, and mortgage stress is increasing.

In the Employee Financial Wellness Survey report, PwC outlined four steps it believes employers should take to strengthen workforce financial wellness.

They were:

• • Make the business case for supporting employee financial health;
  • Recognize what’s happening for employees at home;
  • Leverage momentum to promote good financial habits, and
  • Implement a technology solution paired with human interaction and guidance.
  • The second point – what’s happening at home – is a difficult balancing act. It is clearly private but also incredibly insightful information.

Insights can be gained without breaching privacy by gaining employee permission and buy-in to anonymized data collection. But the need to tread carefully and ethically on this point cannot be overstated.

Leveraging positive momentum – such as employees who have improved their financial position – is important because it reinforces good behaviour and builds trust. Constructive, positive reinforcement feeds on itself, producing positive results – as good leaders know well.

In identifying that 87 per cent of employees want help with their finances, PwC confirms the principles underpinning the financial wellness movement.

This is a case-by-case, site-by-site problem – but people generally want tools, and online delivery is almost always seen as advantageous today, especially with work-from-home so widespread.

The first item in PwC’s list of four steps – Make the business case for supporting employee financial health – is what we’ll concentrate on here because it sets the groundwork for everything else that follows.

PwC makes an important point at the outset: understand what changes in financial stress might be doing to your workforce.

To do that, you have to choose key metrics.

The three PwC suggests are ‘productivity, retention, and physical health’.

Others might include absence rate, job satisfaction, engagement, turnover, career path ratios and the impact of training.

You may find other metrics more useful or relevant to your business.

The Financial Stress Index (FSI) provides a tool to track changes in key metrics over time to give some insight into what is happening for employees to develop effective solutions.

Most significantly, the FSI tracked self-reported changes across a sliding scale of financial stress categories.

Specific and measurable key metrics included in the FSI include:

• • Productivity;
  • Absence; and
  • Physical health.

The FSI provides behavioural insights into financial stress that could contribute to changes in other metrics, such as:

• • Job satisfaction;
  • Career path ratios;
  • Engagement; and
  • the impacts of training.

They also contained a rich data set that included insight into what was happening at home for employees and indications of changes in employee mental health.

In March 2021, comparative FSI insights as they applied to Australian survey respondents across three six-month periods were released.

Comparative data was collected on:

• • Effectiveness at work;
  • Time off work;
  • Days lost due to low productivity; and
  • Changes in physical illness symptoms.

All the above data was collected within the context of levels of financial stress.