Employee Financial Wellness

Posted by Susy Alfaro on Nov 24, 2021

businesswoman smiling

The term financial wellness has been showing up in conversations about employee acquisition and retention more in the last five years than any other time. But how important is it and what does it mean for employers?

Financial wellness, simply put, is the pleasure of having no financial stress in your life. It’s not a certain amount of money or a certain lifestyle, it’s about maintaining the balance between your income and the life you want to provide for yourself and your loved ones. This may seem like a simple concept, yet it’s much more complex than just spending less than you make.

Essential to financial wellness is the flexibility to adapt to any unexpected circumstance life might throw your way, such as a surprise medical bill or car repair expense. The Federal Reserve indicates nearly 40% of Americans struggle to cover an unforeseen $400 expense. With statistics like this, financial wellness becomes more than just a nice-to-have benefit, it’s a necessity that employees have right now that needs to be met.

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Why should employers care about employee financial wellness?

It’s important when we talk about financial wellness that we also consider the benefits to the business. After all, we all want to do what’s right for the people who make our business run, but investment decisions must be weighed and prioritized.

Sixty-eight percent of employees in the United States feel personal financial issues affect their health. In fact, stress from worrying about finances has a similar effect as waiting on a medical test result. This statistic not only translates to unexpected expenses and unnecessary bills and fees in their personal life, but also to missed work and unmotivated employees for your organization.

Traditionally, as an employer, your options for offering the proper resources were extremely limited, but technology advances now provide the right tools to make a positive difference in the lives of those who make your operation thrive each and every day.  

What do these solutions look like?

Education: Education is crucial in moving toward financial wellness. Even though we all get to a point where we need to know how to handle our finances, financial education is still terribly under-taught in both educational and home environments. Providing your employees with the proper resources to improve their personal financial literacy will not only help them in their personal lives but will also help develop a more meaningful and loyal relationship with you as their employer.

In-house advances: The reality is that unexpected expenses don’t always line up with pay periods. Filling in the gap between a bill due date and payday with in-house advances is another way for you to help your team avoid financial stress, boost morale, and improve overall productivity.

Depending on the number of resources available to you and the size of your team, offering advances in-house may be a good option for you. Providing advances can mean more flexibility for your employees and the opportunity to build even more trust and loyalty, however, taking on this responsibility also means you are now financially liable for any funds that need to be repaid. Eighty-seven percent of employers can’t or won’t offer in-house advances due to the risk and overhead cost associated with them. Ultimately, the question is, does it make sense for your organization to assume the administrative task of in-house loans for the betterment of your team?

Paycards: Introduced in the 1990s, paycards are a great example of employers trying to make things as easy and simple as possible for their team. Adding paycards to your existing direct deposit and paper check payment offerings can be important for:

  • Giving unbanked employees a way to get paid and avoid expensive check-cashing stores. According to the American Payroll Association, 10% of American workers do not have a bank account.
  • Providing employees insight into their spending that they otherwise may not get with cash.
  • Giving staff access to their earnings prior to payday.

There are many card solutions available. It’s important to choose one that provides employees low fees and high flexibility, such as with ATM locations and point-of-sale purchases. With the popularity of financial wellness benefits growing, make sure to look for a provider that supports all federal and state compliance regulations and one that provides you with the tools to effectively roll out and administer the program to your workers.

Earned wage access: If paycards or in-house advances don’t seem like a viable solution for you, then perhaps earned wage access is the answer you’ve been looking for. Earned wage access gives employees access to their earned wages prior to payday.

With earned wage access, also known as on-demand pay, a third-party organization accepts the risk and workload that comes with offering advances to your employees. By utilizing modern technology, earned wage access providers can quickly and efficiently provide your employees with all the benefits of paycards or in-house advances, at a much more affordable price. Some earned wage access providers offer educational programs and other training opportunities. Companies like ZayZoon offer a full-range financial wellness platform that caters to each pillar mentioned in this article.

Providing employees with the flexibility to access earned wages prior to payday will not only help boost team morale and overall productivity, but also enhance recruiting and retention efforts for businesses of all sizes. Eighty-nine percent of workers are willing to stay longer at a company that offers Wages On-Demand and 79% of workers say they’d be willing to switch to a company that offered access to their earned wages ahead of payday if theirs didn’t. In an increasingly competitive market where people are more conscientious about how they select where they work, it is becoming increasingly important to stay competitive and offer benefits, or risk falling behind.

Isn’t this just encouraging irresponsible behavior?

A common misconception about those living paycheck-to-paycheck (69% of American workers) is that they just need more money or that they need to just stop spending it on frivolous items. Although some particular markets do have an ongoing wage crisis that needs to be addressed, the reality is that employees need more than a boost in their income to be able to really be in control of their finances.

In a recent survey by ZayZoon of over 7,000 Wages On-Demand transactions, they found that, while short-sighted spending can and does happen for sure, it doesn’t appear to drive the majority of uses. They find that well under 20% of transactions are for discretionary spending. The remaining 80%+ of transactions are for:

  • Day to day necessities (ie. groceries)
  • Recurring expenses/bills
  • To avoid overdraft fees or other penalties
  • To cover unexpected expenses
  • For medicines and other healthcare needs

Pairing earned wage flexibility with effective, accessible education on basic personal finance is the best thing employers can do to promote financial dignity among employees. The key, however, is being proactive as opposed to reactive, offering resources and tools to help educate them and better manage their income before financial worries arise; and then supporting this with financial tools that allow them to come up with a sustainable answer, instead of falling into predatory practices which is what so many people end up having to do.

I’m sold, what can I do next?

Offering employees the resources to properly educate themselves can really make a positive impact. In-person financial training or education from a professional is extremely helpful, but online courses can be just as valuable and much more cost-effective. Tools like earned wage access and other modern employee benefits also offer your employees more financial freedom when financial uncertainties do come up. Teaching your employees about the dangers of debt-spirals and other financial stress triggers could really go a long way and giving them the proper tools to overcome these obstacles could directly affect their livelihood for the better.

Thankfully, we live in a day and age where financial wellness can be an easy benefit to offer your employees in a way that will reduce their stress, increase productivity, and make your company more productive.

Once you’ve decided to go for it, make sure you have the tools to determine what benefit is right for you, as well as that you’re getting what you were promised when you signed up. Thankfully, ZayZoon has a guide for that. 

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