Why Nonprofits Need Workforce Financial Wellness Programs.
Courtesy: Georgia Center for Nonprofits
Financial wellness programs equip employees with the knowledge and confidence to overcome personal finance challenges, covering topics like debt reduction, asset management, and saving for current and future needs. Increasingly, employers are offering financial wellness programs as a part of their overall benefits strategy in pursuit of improved employee morale, focus, productivity, and loyalty, all results that reduce costs and create greater mission impact.
The 2018 Employee Financial Wellness Survey produced by PricewaterhouseCooper (PwC), compiling responses from 1,600 full-time employees, shows that finance-related stress affects 47 percent of all respondents (and a full 53 percent of Millennials), and that this stress has increased over the past year among 41 percent of them. Most tellingly, 46 percent of stress-affected respondents said they spend three or more hours during the workweek dealing with or thinking about financial issues.
Financial wellness programs mitigate this stress by helping employees understand the importance of personal financial preparation, management, and goal setting. Early reports by the Center for Social Development link work-provided financial wellness services with lower rates of absenteeism and distraction, improved productivity, increased employee engagement, and greater organizational commitment. Over the past two years, PwC has substantiated these outcomes with their own research. Let’s explore some of the key findings.
Stress and Productivity
According to PwC research, the effect of financial stress on worker productivity is striking. Compared to their colleagues, employees who are stressed about their finances are nearly five times more likely to be distracted at work by their finances, twice as likely to spend three hours or more dealing with financial matters, and three times more likely to spend five hours or more. Stressed employees are also twice as likely to miss work on account of their personal financial issues and are more inclined to cite health issues caused by financial stress. They are also more likely to experience difficulties with relationships at home.
Employees who are stressed about their finances are nearly five times more likely to be distracted at work by their finances. In a 2010 study, the Federal Reserve reported that financial stress costs businesses $5,000 annually in lost productivity per distracted employee. To make the case for investing in a financial wellness program for your organization, you might want to consider calculating the amount it’s costing you.
For that, you should use the recent PwC survey data, which indicates that 25 percent of all employees, and 33 percent of Millennial employees, are distracted by their finances at work. Among those distracted, 43 percent say they spend three hours or more at work each week dealing with issues related to their personal finances.
For the sake of simplicity, let’s assume I have 100 employees, and their average wage is $26 per hour. Using the statistics above, that means I am likely to have 25 financially stressed workers; among them, 11 are distracted at work for at least 3 hours per week. Over a 46-week work year, those 3 hours add up to 138 hours; that means lost productivity costs me $3,588 per distracted worker, per year. My grand total is $39,468 per year – a conservative estimate, given the fact that my most stressed workers might be spending more than 3 hours each week distracted by finances.
Stress and healthcare costs – absenteeism
Healthcare costs have become a major concern for employees, and these concerns have impacted their work and their health. According to the PwC survey, a large majority of employees (about 78 percent) believe healthcare costs will rise over the next several years. With the potential for changes to current healthcare laws still looming, a significant percentage (54 percent of those feeling stressed financially and 34 percent of those not reporting stress) say they are most concerned about A) their ability to save for future healthcare expenses, and B) how the rising cost of health care impacts their ability to save for retirement.
In addition, more than a third (35 percent) of those reporting financial stress say their health has been impacted by their financial worries. Absenteeism spurred by financial stress adds to the productivity calculations in the previous section. It’s worth noting that, whatever the direct costs of employee absenteeism – that is, in terms of the hourly rate expended for time employees are absent – a number of hard-to-measure indirect costs will also accrue, such as lost opportunities, missed deadlines, and overtime increases for those who might need to fill the gaps.
Stress and engagement – turnover
Financial stress may also influence employee engagement. PwC’s comparative data indicates that employees’ loyalty, morale, and appreciation for their salary and benefits, as well as efforts to recruit and retain talent, may be linked to workers’ overall sense of financial wellness.
Among the data to consider:
Loyalty: 50 percent of employees who report financial stress are less likely to think their employer cares about their financial well-being. That’s important because a whopping 76 percent say they’re more likely to be attracted to an employer who does care.
Morale and appreciation: Employees who report financial stress are more than twice as likely than their non-stressed colleagues (58 percent to 28 percent) to report feeling their compensation is not keeping up with their living expenses. Stressed employees are also less likely to believe their employer benefit plans are competitive with other organizations (at a rate of 60 percent, compared to 67 percent of non-stressed employees).
Recruitment competitiveness: Those reporting financial stress are not as likely to be proud to work for their employer (72 percent versus 77 percent) and less likely to recommend their employer as a great place to work (66 percent versus 72 percent). Because many of the best employees come from referrals made by your current employee base, this means recruitment can also take a hit.
Retention efforts: “Happiness” with the job is documented to be lower among the financially stressed, leading them to jump around for pay (often without weighing the value of competing benefits packages).
You can estimate the cost of stress-related turnover by figuring that the average cost of replacing anyone amounts to 40 percent of their total salary value (that is, wages plus FICA plus the value of employer-offered benefits), and considering the number of employees who might leave you for financial reasons.