Here’s a fun stat to start us off: 69% of employees in the United States are stressed about finances.
Between credit card debt, student loans, and rising costs of living, the American workforce is worried about money (if you're a member of that workforce, you’re probably highly aware of this). But you might not be aware that this financial stress costs companies $2,000 annually per employee.
That’s a bit shocking, but there’s a simple solution: financial wellness programs. These employer-sponsored programs are geared toward helping employees navigate life's many stressful real-life financial decisions.
Here’s exactly how these programs help - by the numbers.
~3% Reduction in Employee Wage Garnishing
Garnished wages are a particularly intrusive (though entirely legal) way for creditors to get their money back. When an employee isn’t making regular payments on a debt, creditors are sometimes allowed to take a portion of their paycheck - paying the debt by circumventing the debtor.
Employers end up having to process this transaction, which takes time and resources - just like running payroll. IF you live in a select few states, employers are allowed to charge a fee for this additional effort on their part, but for the most part, the payroll team bears the burden.
However, a financial wellness program can significantly reduce garnishments. One study found that an increase in financial wellness decreased the likelihood of wage garnishing from 4.80% to 1.84%. Particularly with wage garnishing, financial planning and money-management advice can make all the difference.
A large business (50,000+ employees), like a hotel chain or retailer, could end up saving over $440,000 a year (based on an average $300 annual cost to process garnishments).
Even for medium-sized businesses, the savings can really add up. And it’s worth remembering that the costs of wage garnishing aren’t just in your time and effort - the situation often humiliates, inconveniences, and stresses the employee, all of which decrease productivity in their own right. Debt is a vicious cycle.
1% Lower Employee Turnover
With stress levels as high as they are, personal finances often win out over company loyalty. Someone chronically concerned with their financial situation may be more willing to move to a business with better employee benefits.
However, offering a company financial wellness program can mitigate this job migration. As a matter of fact, 46% of Millennial employees and 44% of Gen X employees say that a company caring about their financial wellbeing influences their loyalty to the company.
Greater loyalty translates to lower turnover - 1% lower to be exact. That might not sound like much, but again, it adds up. Let’s do the math for an example company, International Star Hotels:
- Current turnover rate: 10%
- Estimated cost to replace an employee: $45,000
- Number of employees: 50,000
- Projected reduction in turnover: 1%
- Total savings on turnover-related costs: $2,250,000
International Star Hotels’ decision to implement a financial wellness program pays off - but even smaller businesses can reap the benefits of a lower turnover rate.
24.6% Reduction in Absenteeism
How’s that for an impressive statistic? That being said, it’s not too hard to see why a financial wellness program would have this effect. Financially stressful situations are usually time-consuming and unpleasant to deal with, and some of that often bleeds into work hours.
For example, an employee facing foreclosure may be scrambling to find a rental, and have to unexpectedly leave early or come in late. If there were a financial wellness program in place, they might have been given advice and guidance enabling them to keep the house - and they wouldn’t have to be doing all this rental-hunting.
In fact, after improving employee financial wellness, it was found that the average number of hours of unplanned absences fell from 13.73 to 10.35 - a 24% reduction.
And that’s not even mentioning the negative impact of financial stress on physical health - which also contributes to missing work…
Lower Healthcare Costs - $271.50 Saved Per Employee Per Year
Financial stress weighs heavily on the average person, and when we’re focused on making it to the next paycheck, our health suffers. Financially stressed employees are 2x more likely to report poor overall health and are over 4x more likely to complain of headaches, depression, or other health issues.
It’s more than just chronic psychological distress causing problems, workers actually forgo treatment they need when they’re on a budget. 12% of Americans admitted they have skipped going to a doctor when they needed health care because of financial concerns.
As it turns out though, financial wellness can help on this front as well. Less stress = better health, and better health = lower healthcare costs. A review of a Fortune 100 healthcare company found just that. The stat breakdown for healthcare costs is pretty striking:
- Employees using the company financial wellness program: 4.5% decrease in healthcare costs
- Employees NOT using the company financial wellness program: 19.4% increase in healthcare costs
- Overall savings: $271.50 per employee
Even if you only have 10 employees, you’ve now saved enough just from improved employee health to throw a company party (and increase morale even more.)
13% Increase in Employees on Track to Retire On Time
On top of keeping people physically healthy, financial wellness benefits can strengthen their chances of an on-time retirement.
According to a study by Price Waterhouse Cooper (PWC), 40% of employees plan to retire later than they previously planned. And much of that has to do with financial stressors like aging parents, supporting adult children, or paying off student loans before tackling other financial goals.
For every year an employee delays retirement for financial reasons, the employer faces estimated additional costs of between $10,000 and $50,000. If there is a large proportion of workers putting off retirement, this can take a real toll on the bottom line.
Financial wellness programs can help workers prioritize contributing to their retirement plans and help keep them on track to retire. Research found that employees who participated in their employer’s financial wellness program increased their likelihood of being on track for retirement from 34% to 47%”. Bumping the number of employees on track to retire from just over one third to almost half the workforce translates to some serious savings for employers as well.
25.6% Increase in HSA & FSA Contributions
While this might not sound like the most enticing side-effect of financial wellness programs, employees with access to financial wellness programs contribute more to important savings - particularly Flexible Savings Accounts and Health Savings Accounts.
With improved financial circumstances brought about by better budgeting, financial education, and financial literacy, employee contributions increased 25.6%. That’s pretty significant for employees - more money saved puts them closer to financial comfort.
However, this increase is also helpful for employers, as FSA and HSA contributions are not subject to the Federal Insurance Contributions Act (FICA), which means employers don’t have to match those tax payments when employees contribute to these accounts. For an employer with 50,000 employees, those savings add up to $900,000 annually.
These calculations don't include how much employers save in taxes when employees make 401(k) contributions. The more they're saving for retirement, the smaller your tax bill (up to a limit).
Definitely not something you want to disregard.
Many of these stats are relatively incremental increases and decreases - but taken all together, they form the picture of a comprehensive and coordinated solution.
Financial wellness programs really do “benefit” everyone. Naturally, employees benefit hugely from practical financial wellness programs. But the real winners might be employers, who reap the benefits of a less-stressed workforce - higher productivity, lower turnover, better health, improved morale, and lowered costs.
If you’re an employer without a financial wellness program, at this point in the post, you’ve got to be asking yourself: “What am I waiting for?”