“In the studies that I have seen concerning participants that have gone through comprehensive wellness programs, you can see much higher participation rates in 401k plans. This is good for the employer in that they experience more engaged employees, less absenteeism, lower stress rates, and lower healthcare costs, which all relate to the broader concept of employee wellness. The financial wellness side of the business needs to look at the health and wellness side of the business. There are key lessons and best practices to be learned.”
— Ron Bush
The number of employees stressed over financial issues is on the rise.
Part of reason involves the widening income gap, which places more stress on employees in lower income brackets. Until recently, financial stress was experienced mainly by those people in higher income brackets. For example, the segment of employees suffering the highest amount of financial stress in 2011 was the $100K and above income bracket. In that same year, 28 percent of workers making between $30K and $49K revealed stress over finances. (1)
One year later, in 2012, the $30K to $49K group suffering from financial stress rose to a disturbing 40 percent, illustrating that more of the American workforce is progressively suffering on-the-job stress over personal financial matters.
Impact to productivity
Many companies continue to insist that employee financial troubles are a personal, not corporate problem. However, findings of various studies reveal that personal money issues of workers do indeed directly affect the companies for which they work.
Study results concerning financial-related stress include decreases in worker productivity per employee by up to 20 hours monthly, rises in on-the-job accidents from between 60 and 80 percent, higher health problems requiring medical attention (stress has been found to be the cause of 75 to 90 percent of all doctor visits), greater stress-related turnover rate (40 percent), and more demand placed on human resource offices that can raise expenses by up to 10 percent.(2)
As personal finance stress grows, it begins to erode the employee company culture. Stress and even depression can quickly spread throughout the workplace as employees share financial troubles, which can impact positive work attributes. Before long, personal financial stress is negatively affecting businesses via lack of worker focus and commitment, declining productivity, absenteeism, in-house conflicts, poor health, costlier insurance rates, employee dependence on company benefits, and increasingly high rates of worker turnover.
The cost to employers who ignore the financial illiteracy of their workers is significant. Figures from Personal Finance Employee Education Foundation data revealed the following on a per employee basis per month: (3)
Lost productivity for each financially unwell employee $450
Higher healthcare cost for poorer health $300
Subtotal (in 2009) $750
Lost employer FICA savings on worker who doesn’t join healthcare reimbursement $92
Lost employer FICA savings on dependent care reimbursement $382
Worker stays in expensive health plan $800
Total opportunity cost (in 2009) Over $2,000
The data demonstrates that the cost to an employer for not providing basic financial education to employees that would change their spending and savings behaviors is between $750 and $2000 per employee annually.
Employer solutions
Certain employers fail to realize that they can improve profits by helping employees change personal finance behavior. Other companies have an understanding of the problem, yet ignore it. Financial education programs seek to directly address employee financial stress issues. However, they also seek to educate company owners and managers on how they can directly boost their bottom lines through improving the financial literacy of their workers.
When department heads and HR managers understand how financial literacy improves work performance, decreases expenditures, and increases profits, they are more attentive toward helping their workers improve their personal financial health. This is beneficial for everyone involved.
- Personal Finance Employee Education Foundation. Retirement Preparedness Research Report, 2011. Available from pfeef.org/wp-content/uploads/2015/01/2011-Financial-Stress-Research.pdf.
- Price, Deborah (2009). Responding to Workers’ Financial Crises. Via Personal Finance Employee Education Foundation. Available through provided link at pfeef.org/industry-research/
- Personal Finance Employee Education Foundation (2009). Available from pfeef.org/
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
