Employee Finances: The Global and Generational Elephant in the Room

Poor Personal Finances Negatively Affect Productivity on a Global Scale

  • US and American employers are increasingly adding a financial wellness component to their employee benefits program

  • Younger generations waste twice as much time at work dealing with their personal finances

Americans do not hold a monopoly on poor personal financial behaviors. And the US is not the only country where such behaviors negatively affect the workplace.

In the UK, 45% of employers already have in place some sort of financial wellness strategy for their employees. Why? Because, like their American counterparts, they recognize that poor personal financial behavior among their employees leads to lower productivity, less engagement, lower loyalty to the company, and higher levels of stress within and between employees.

Employers that provide financial wellness benefits may notice increased productivity.

Employers that provide financial wellness benefits may notice increased productivity.

IT IS ALSO A GENERATIONAL ISSUE

GenXers spend an average of two hours every week, while on the clock, dealing with their personal finances.

That is 5% of the pay period. HR managers and business executives spend countless hours and tens of thousands of dollars a year trying to increase their productivity by even a fraction of a percentage point.

As bad as that 5% sounds, the truth is that Millennials spend twice that much time on average dealing with their personal finances while at work.

What would you be willing to do to improve your company’s bottom line by 5%, let alone 10%?

WHAT MATTERS MOST IN A FINANCIAL WELLNESS PROGRAM

Before you call your benefits broker and request a workshop facilitator to discuss retirement planning, ask yourself this question:

  • Which stresses (or would stress) you out more? Not investing enough for your retirement 20 or 30 years in the future, or not being able to pay your utility bill or rent this month?

Far too many employers with any kind of financial wellness program think that providing information and workshops on retirement planning is all that is needed. While critical to the employee’s long-term well-being, retirement planning and its related educational programs fail to address the immediate concerns of your employees.

WHY EMPLOYEES ARE ASKING FOR RAISES – BRACE YOURSELF

Unfortunately, poor money management often includes poor spending behaviors. It seems that human nature dictates that, as long as there is no plan in place, the more money you earn, the more money you will spend. Your employees who have not developed personal financial discipline currently believe that their money problem is an income problem.

That is why they ask for pay raises. That is why they ask for pay advances. That is why they don’t stay at your company for more than a year. They are continuously chasing a bigger paycheck.

Most personal financial problems in the US and other developed countries are not income problems. They are spending and saving problems. Specifically, 60% of American households live paycheck-to-paycheck, not adding a penny to their emergency fund. They do not prepare for the fridge that will need replacing. They do not save for the upcoming car repairs.

However, they overwhelmingly still pay for cable or satellite TV. They still overwhelmingly have massive car payments. They still overwhelmingly spend $300 to $1,000 a year on brand new cell phones while at the same time they come to you asking for a $500 a year raise.

We can all agree that employers are not responsible for telling employees how to spend their paychecks. However, when employees begin demanding concessions from their employers (e.g. pay advances, unexpected or undeserved raises), the employer now has a financial interest in supporting the development of healthy personal financial attitudes and behaviors.

GETTING BEYOND RETIREMENT PLANNING

Besides 401(k)s and retirement planning services, employers should consider adding a robust personal finance counseling or coaching program to their employee benefits. Employees are not likely to access EAPs, especially if they know that EAP financial services typically max out at 30 minutes of “budget counseling,” after which they have to pay fees out of their own pocket.

Engaged employers know that they need to both choose and promote immediately-helpful financial counseling and coaching services that their employees can access free of charge by phone or online. These include reaching out to nonprofit credit counseling agencies like Money Fit by DRS that offer free budget counseling, free credit report analyses, free student loan counseling, and free financial education programs, not to mention their low-fee-based debt management service.

EASY IDEAS FOR MAKING FINANCIAL WELLNESS MORE ACCESSIBLE

  • Post it

  • Make it part of orientation

  • Add materials to regular reviews

  • Bring in experts

  • Add contingencies to paycheck advances

When you are ready to make a difference in the lives of your employees and, consequently in your company’s bottom line, through a financial wellness program, commit to doing more than tacking a poster to the lunch room news board (though that is a place to start). Require a 3-minute video from your financial wellness program partner in your company’s orientation process.

Each year, you might include a flyer from the financial wellness program in your annual review process. Require the completion of a financial wellness online course (e.g. budgeting, dealing with debt, etc.) before approving repetitive paycheck advance requests.

Offer lunch ‘n’ learns where you supply the lunch and the financial wellness program provider supplies the expert. Certainly paying for lunch once a quarter or even once a month is cheaper than losing 5% to 10% of your employees’ productivity every week.

Your employees can do more to improve their personal financial situation through a financial wellness program than you can through a pay raise. Join the “work smarter not harder” financial wellness movement, and everyone at your office will benefit