Financial Wellness Programs Help Employees Get More Out of Paychecks, Even Without Raises
It's 9 a.m. and John Smith turns on his workstation computer to begin his workday, yet the first Web site he logs onto is his financial institution to see if he has overdrawn his checking account, and the first phone call he takes is from a debt collector. While this example is only an illustration, "John" has plenty of real world counterparts.
In May 2009, the polling company Harris Interactive released its third annual financial literacy survey reporting that more than one in four adults admits to not paying all bills on time and one in three claims to have no savings. In related research, the survey revealed that nearly 60 percent of the workforce agrees they always or usually live paycheck to paycheck just to make ends meet.
Financially Stressed Employees Can Stress A Company's Bottom Line
Depending on the workplace, anywhere from 30 percent to 80 percent of employees waste time dealing with personal financial matters, according to the Personal Finance Employee Education Foundation. This translates to 12 to 20 hours a month of lost productivity.Splitting the difference of her estimate, one can assume the average worker spends 16 hours a month, or 10 percent of a 40-hour work week, on non-work related issues due to financial concerns.
Given an individual's average annual wage of $30,000 x 10 percent loss of productivity, the estimated cost to an employer of 150 workers is $450,000 per year. Experts agree that the costs of having employees with financial pressures is staggering and include absences and tardiness, losses in company inventory, decreased stress tolerance and increased substance use issues, among others.
Most employees see one way out of financial problems: earning more money. When they can make their paychecks go further, there is improved job satisfaction, better staff retention,enhanced employee-employer relations, less discord among workers and improved employee morale.
Unfortunately, few businesses can afford to increase payroll during the current economic environment. The alternative is to offer financial wellness programs as a voluntary benefit, helping workers get more out of their paychecks and, in effect, giving them raises without increasing payroll by a single penny.
A Voluntary Benefit Employees Need and Want
The Harris survey referenced earlier reports that:
- 41 percent of U.S. adults, or more than 92 million people living in America, gave themselves a grade of C, D, or F on their knowledge of personal finance;
- 80 percent of adults agree they would benefit from advice and answers to everyday financial questions from a professional; and
- only four percent cited the workplace as the source where they acquired their knowledge of personal finance, down one-third from a year ago.
Offered as a voluntary benefit, financial wellness programs send employees a valuable message, letting them know their company cares about them and is ready to extend a helping hand to those in need.
Choosing A Financial Wellness Program
A typical financial wellness program will include:
- Setting goals: Whether saving for a child's education, creating a safe retirement, buying a home or eliminating debt, setting goals is an important first step to understanding personal finance. Working towards a meaningful goal also provides positive reinforcement of the rewards derived from one's work.
- Budgeting: I prefer to use the term spending plan which is about deciding how and when to spend money to your best advantage. Educational seminars offering simple and highly effective money-saving tips, such as how to save at the grocery store, can help employees find "extra" money in their paychecks.
- Credit education: With new credit card regulations, consumers are being hit with information from all sides and can benefit from learning what to look for when applying for credit, how to improve credit scores, how to use credit wisely and how to access and, if necessary, correct credit reports.
- Avoiding identity theft: The Federal Trade Commission cautions that people whose identities have been stolen can spend months or years and thousands of dollars rectifying the situation. Dealing with the anger, frustration and unending paperwork can consume someone's work and private life.
- Buying and keeping a home: The homeownership landscape has altered drastically for those attempting to secure the credit to buy a home as well as for homeowners who are in danger of losing their homes due to an inability to make mortgage payments.
- Getting schooled on student loans: Young employees just beginning their careers typically earn lower wages while many are carrying large student loan debt and could benefit from learning to manage their finances. According to figures released by the U.S. Department of Education in September 2009, the national student loan cohort default rate for FY 2007, the most recent year for which statistics are available, increased to 6.7 percent up from the previous rate of 5.2 percent.
- Smarter shopping: From high-tech strategies such as searching for rebates and discounts before making an online purchase to clipping newspaper coupons, there are simple steps that consumers can take to save money on everyday necessities as well as luxury items and vacations.
- Learn it to live it: Educational materials relating to personal finance instill healthy spending habits for employees of all ages.
- Confidential credit counseling: The program should provide access to certified credit counselors who provide free and confidential credit counseling including an analysis of income, assets and debt; review of financial goals; review of financial stressors such as gambling and referral to community-based resources, where appropriate; and the creation of a strategy to solve current money issues and avoid others in the future.
- Debt Management: Workers requiring debt management services should have access to a debt management plan that contacts creditors and collection agencies to negotiate lower payments and reduce or eliminate interest and other service fees; re-ages debt to preserve credit rating; and facilitates monthly payments to creditors.
When considering an Employee Wellness Program offering credit counseling and debt management programs, look for vendors who are 501 (c) (3) non-profit organizations that are members of the Better Business Bureau and licensed to do business in the area. Typically, such non-profits must offer educational services to the community free of charge and employees requesting debt counseling services can pay no more than $49 to enroll and a nominal monthly service fee, depending on local regulations.
Some financial wellness voluntary benefit programs will waive all fees for the client's workforce. After participating in a financial wellness program, employees can gain peace of mind, become debt free, consolidate and lower monthly debt repayments, save money, free-up extra cash, stop harassing creditor calls, avoid bankruptcy and plan for a healthy financial future.
Without incurring any hard costs to establish a quality financial program, employers see real monetary gains that are derived from heightened productivity, less absenteeism, reduced turnover, lower healthcare costs, fewer workers' compensation claims and improved job performance. The economy has hurt workers and employers alike. Financial wellness voluntary benefit programs help them both survive tough times and become better prepared for the inevitable upswing.
As Director of Education and Community Development for the non-profit American Debt Counseling, Inc (ADC), Barbara J. Stark creates and reviews educational materials promoting all aspects of personal money management and shares her financial knowledge through her blog posts at getdebthelp.org and in the media including NPR, USA Today and Smart Money.
ADC's Employee Financial Wellness program is provided to companies free of charge with all fees waived for employees requiring debt management services. The program has been featured in the Orlando Sentinel, News and Observer, Fort Worth Star Telegram and Columbus Dispatch among others. Combining nearly two decades as a communications professor with a successful career leading community education and outreach programs for non-profit organizations, Barbara presents educational seminars for community organizations and businesses offering financial wellness programs for their workforce.
She also frequently appears as a guest speaker on issues relating to personal finance. Barbara is a Professor of Communications at Broward College in Ft. Lauderdale and served on the faculty at Nassau Community College in Garden City, NY. A native of Long Island, New York, Stark holds both a Master of Arts and Bachelor of Arts degree in Business Communications from Adelphi University.
ADC, a non-profit organization based in South Florida, provides financial education programs as well as confidential and professional credit counseling and debt management services across the nation. ADC is a member of the Better Business Bureau and licensed and/or otherwise authorized to do business in the states requiring such.