At small- to medium-sized enterprises (SMEs), absenteeism can have a massive impact on the company’s ability to conduct business.
Employees who don’t show up for work create a ripple effect in productivity. They require time out of an owner or manager’s day to reassign work to present employees. This then disrupts that person’s duties, meaning more productivity will be lost.
When you are forced to shift responsibilities, something will have to be sacrificed. That’s a tough choice to make.
SMEs, which make up the vast majority of businesses in the U.S., often encounter employees with cash shortfalls, coming to the employer asking for a pay advance as their last resort. If employees participate in a 401k program, they may withdraw funds at a very high cost to solve their financial challenges.
Research shows 60% of investors ages 18 to 34 have already withdrawn money from their retirement account. Employees too often have slashed their retirement contributions because they need the funds. A recent Yahoo! Money article reported “The share of Millennial workers saving 2% or more of their income in retirement accounts plunged by 39% from the last half of 2018 to the first half of this year. That figure dropped by 32% among Gen X employees and 22% among Baby Boomer workers.”
These are frightening statistics.
SMEs function much like a family unit—of course business owners want to support their employees when they’re struggling. But without external resources, this falls on the owner’s shoulders and puts an unexpected strain on the cash flow of the business. What if there was a better way?
Enter Financial Wellness
Financial wellness exists for exactly that purpose—to provide a way for employers to offer financial resources and solutions to employees without negatively affecting the business (or costing an arm and a leg).
Financial wellness programs are designed to require little to no work from the employer; this is crucial for organizations with small or non-existent HR departments. The business owner is able to offer a valuable benefit to employees, giving them access to resources they wouldn’t have otherwise. Financial wellness programs remove the burden from the employer; notifying employees of the benefit, providing support for the products and services, with no employer liability for financial solutions provided.
Frequently all the resources are available online, so employees are responsible for managing their accounts. They are 100% in control of the tools and solutions they choose to engage with.
Employers aren’t financial coaches
Financial coaching is rapidly gaining traction as one of the most desirable benefits. Does the business owner have someone on staff, possibly the owner him or herself, that is the resident ‘counselor?’ This individual wants to help, but they aren’t certified and it’s taking time away from their core job responsibilities.
Nearly 3 in 5 employees said they would be comfortable sharing financial info with their employer or an appropriate third party for personalized financial information or guidance. Wouldn’t business owners rather that counseling be provided by a third party?
The value proposition
But financial services and benefits are expensive, right? Health care, employer-match 401k programs, financial coaching, financial education, online budget management tools—these all come at a price. For smaller employers to offer these single-point solutions, the price is generally steeper and often the product or service must be scaled back.
Through financial wellness programs, employers can take advantage of a bundle of vetted services at a more cost-effective price point. This is a benefit that adds huge value for a fraction of the cost they pay for other standard benefits.
According to industry research, 83% of employers are currently offering a financial wellness program to stay competitive, and 14% are planning to offer one in the next two years.
Financial wellness benefits help to attract and retain talent in this very competitive job market. If employees find benefits they’re looking for elsewhere, they will leave.
I’m sure most employers have experienced how costly it is to replace an employee. Off-the-shelf estimates set the cost of an entry-level position turning over at 50% of salary; mid-level at 125% of salary; and senior executives over 200% of salary. That’s certainly not going to help improve ROI.
Based on a proprietary survey conducted with employers that offer the FinFit program, they reported the following ROI as a direct result of their employees utilizing financial wellness tools and resources:
- 36% reduction in 401k borrowing and payday advance requests
- 23% decrease in absenteeism
- 40% increase in employee productivity and focus
- 43% increase in employee engagement and morale
These are results that could have a material impact to an SME’s bottom line, and to the overall health and well-being of its employees.
Financial wellness programs are not just accessible to large enterprises. All organizations, especially those already strained from a resource perspective, will see immediate results from offering financial wellness benefits.
David Kilby is a personal finance expert and president of FinFit, a national financial wellness brand based in Virginia Beach, Virginia.