The productivity losses and costs associated with employees’ financial stresses are reaching levels where a business case can be made for companies to help workers manage their finances.
Recent research shows that 85%1 of Americans are anxious about their finances. And about 56%2 of U.S. workers, regardless of income, are suffering from some kind of financial stress, whether it’s paying off debt, struggling to save enough for retirement, or dealing with the soaring costs of education.
Information alone does not necessarily bridge the gap for individuals who are struggling to get by.
The impact of this stress on companies can be large—some calculate as much as $7,000 per employee per year3,4. It comes in the form of lost productivity from distracted workers; higher healthcare costs because of stress-related illnesses; more days off; and higher turnover. According to a new report by the Center for Financial Services Innovation (CFSI) in partnership with the Morgan Stanley Institute for Sustainable Investing, there’s a business case to be made for companies to establish new programs and provide new financial services that help employees manage their finances.
“It’s smart business to invest in employee financial health,” says Hilary Irby, Managing Director and Co-Head of Morgan Stanley’s Global Sustainable Finance Group. “By helping employees spend, save, borrow and plan, companies can increase staff engagement, differentiate themselves from their competitors, attract the best talent, and ultimately drive business growth."
The answer to the challenge is more than just education. “Unfortunately, information alone does not necessarily bridge the gap for individuals who are struggling to get by," says Rob Levy, a Managing Director at CFSI and a co-author of the report. “Financial education efforts, which only focus on knowledge gains, need to be coupled with products and services that encourage behavior change and can improve consumer financial health outcomes."
The report outlines seven steps that companies can take to introduce an effective employee financial-health strategy. The aim is to provide employees with knowledge and access to financial products, which help them “spend, save, borrow and plan.”
Once a company has acknowledged the significance of employee financial health and has buy-in from across the business, it’s important to understand the specific needs of its employees by talking to them about their challenges. There is no one-size-fits-all approach to financial health.
There’s plenty of workplace programs, products, apps and services available today, which companies can adopt to help employees save for emergencies, as well as plan for long-term needs. “A common misconception is that financial health is synonymous with income level,” says Sohrab Kohli, the report’s co-author, and Senior Associate at CFSI. “And while there is certainly a correlation between income and overall financial well-being, it's not the only determinant. Income alone does not say anything about regularity of income, debt burden, or planning and savings habits.”
Also important, notes CFSI, is measuring success. You can’t improve your program if you don’t know whether it’s working. By evaluating effectiveness and committing to continual improvement, companies can tap into the business case for employee financial health and set themselves, and their people, up for long-term success.