Proving the business case for financial wellness programs

Financial wellness has been a buzz phrase in the workplace for a few years now – with good reason.

More and more data show how bad for productivity the problem of employee financial stress is.

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

A survey by salary finance found American businesses are losing $500 billion per year due to employees’ personal financial stress.

Employers want to engage and retain productive employees – yet the day-to-day challenge of trying to pay bills and manage finances is leaving employees stressed and distracted at work, according to PwC.

That’s why blue-chip organisations seek to measure changes in financial stress, as PwC did recently, in its 2021 Employee Financial Wellness Survey of 1,600 full-time employed American adults.

It found that nearly two-thirds (63 per cent) of full-time employees said their financial stress has increased since the start of the pandemic.

Employees whose financial stress increased due to the pandemic were four times as likely to have experienced a decrease in overall household income and to find it difficult to meet household expenses on time each month.

They were twice as likely to have used short term credit in the last year, to have taken a loan or funds meant for their retirement and even to be considering postponing their retirement.

Of the employees who were more financially stressed, a high proportion (45 per cent) reported that their finances were a distraction at work, a majority (57 per cent) avoided medical treatment because of the cost and an overwhelming number (72 per cent) were interested in a company that cared more about their financial well-being than their current employer.

The United States is of course a different market, but the underlying principles apply to Australia: financial stress affects key metrics and it also worsened in the early stages of the pandemic.

In its 2021 Employee Financial Wellness Survey report, PwC outlined four steps it believes employers should take to strengthen workforce financial wellness.

They were:

  1. Make the business case for supporting employee financial health;
  2. Recognize what’s happening for employees at home;
  3. Leverage momentum to promote good financial habits, and
  4. 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 any 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 own 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 in general, people 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.

There may be other metrics you find more useful or relevant to your business.

The Financial Stress Index (FSI) provides a tool to track changes in key metrics over time, to provide some insight into what is happening for employees in order 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
  • And the impacts of training.

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

In March, 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.

You can find out more about the FSI here.