Financial Wellness or Cash Flow Band-Aid?

June 26, 2023

Abstract:

This white paper explores the impact upon the overall financial wellness of workers when using various financial point solution benefit programs such as earned and early wage access (EWA), buy-now-pay-later (BNPL), and small dollar employer loan programs. It also explores the pros and cons of point solutions and potential positive or negative effects on employees’ overall financial well-being. Analysis and discussion include whether point solutions provide a meaningful “financial wellness” benefit as often touted, or if these limited benefits are more of a short-term fix approach to serious financial challenges faced by workers: pervasive consumer debt, low wages, and cashflow mismanagement. The paper concludes with a comparison of point solution outcomes versus a holistic financial coaching and wellness approach.

To read the full Report, download now.

COVID-19 Special Report: The Impact of a New Normal

May 13, 2020

At the time of this report, America is battling the COVID-19 global pandemic. In response to social and economic pressure, many employers have adjusted the way they do business, including implementing social-distancing protocols, work-from-home arrangements, and in some cases workforce reductions. Virtually all employees, to one degree or another, are experiencing adverse effects to their financial health. These effects are often hardest felt by those that are least prepared to handle them.

Although there is a tendency to look at the workforce as a single unit, employers increasingly need to segment their workforces from a financial wellness perspective because of the disparity in financial stress and behavior that exists among coworkers. In our 2016 ROI Special Report, we introduced a method of segmenting the workforce into five levels of financial health based on employees’ financial wellness scores: Suffering, Struggling, Stabilizing, Sustaining, and Secure. This report includes more detail on each segment.

Q&A with Financial Finesse CEO, Liz Davidson

May 06, 2020

Financial Finesse’s 2019 Year in Review Research Study & The Impact of a New Normal Post COVID-19

View the entire COVID-19 best practices abstract “The Impact of a New Normal” here.

1. Question: What were the most significant takeaways from the 2019 Year in Review report?

Answer: For this year’s report we looked at how engagement in online, group, and individual learning sessions influence change in financial wellness as measured by the Financial Finesse Financial Wellness Score. The results were astounding.

Employees that engaged in group learning improved their financial wellness score on average 1.11 points, 40% higher than the 0.79-point average improvement by those that engaged exclusively online. But it was the employees that followed the best practice model and engaged in all three forms of learning that topped them all, improving their financial wellness score on average 1.44 points, outperforming group learners by 31% and online-only learners by 83%.

This improvement in financial wellness also translated into improvement in benefit participation. Employees that engaged in the best practice model had a 43% higher retirement plan deferral rate and an 81% higher annual contribution to a health savings or flexible spending account than employees that only engaged online.

We also found that the greatest net improvement—which is the difference between improvement by those that engaged in the best practice model and those that engaged exclusively online—occurred among employees with the lowest levels of financial health. What is even more remarkable is the speed of improvement. Financially stressed employees exhibited the greatest degree of improvement in the shortest amount of time across all levels of engagement.

2. Question: What can employers leverage from the 2019 Year in Review report to help employees navigate the financial impacts of COVID-19?

Answer: In the wake of the COVID-19 pandemic, we are seeing signs of increasing financial stress associated with the stock market and U.S. economy manifesting itself as a lack of trust in sources of financial guidance and concern for not reaching future financial goals. When considering the relationship between physical health, workplace productivity, and financial stress, this should have employers’ attention. The good news for employers is that the best practice model yields the greatest improvement in financial wellness for the most financially stressed employees in the least amount of time. These results could not have come at a better moment in history.

As the pandemic persists, we expect to see a shift toward lower levels of financial health across the global workforce. Given the strong relationship between financial health and employment cost, we encourage employers to focus their COVID-19 efforts on providing financial resources and support to their most financially stressed populations first. This population can be defined through a workforce financial wellness assessment, a demographic analysis, or by measuring financial stress metrics such as retirement plan leakage, garnishment, or benefit utilization. Once the at-risk population is defined, consider offering ongoing financial coaching delivered through a multi-channel model if possible.

3. Question: What drives the trend of end-users in the lowest tiers of financial health exhibiting the greatest level of improvement in the shortest amount of time?

Answer: The emotional courage it takes to confront serious financial issues is significant. Finances still remain taboo, especially for those who are struggling financially, and there’s often a sense of shame or helplessness they have to overcome. The best practices model is well suited to mitigate that, because it is set up to reduce barriers as a financial wellness benefit that can be accessed however employees feel most comfortable, and then migrate to ongoing financial coaching when they are ready. The message they get is “We are all in this together. Everyone has financial challenges. You are not alone and there is nothing to be ashamed of.” That alone makes a huge difference.

Then when you consider the small wins in finding ways to reduce expenses by getting better deals on essential items, get credit relief or lower interest rates, begin the process of starting an emergency fund, can make a huge difference to financial stability, it makes sense that those who struggle most would improve the most with a model that provides unlimited financial coaching through multiple channels.

4. Question: On average, which aspects of an employee’s financial wellness improved the most under the best practices model?

Answer: On average, employees that engaged in the best-practice model for five or more years showed a 1.59-point improvement (on a 10-point scale) in financial wellness score. The greatest net difference between improvement among employees who engaged exclusively online and those that engaged in the best practice model occurred in the areas of retirement planning and investing. Employees that engaged in all forms of learning also had a 43% higher retirement plan deferral rate and an 81% higher annual contribution to an HSA or healthcare FSA than employees that engaged exclusively online. They were also more likely to have a handle on cash flow, have an emergency fund, pay bills on time, be comfortable with debt, and pay off credit card balances in full.

5. Question: How do you anticipate COVID-19 may alter the traditional compensation and benefits structure most workplaces have become accustomed to? Do you anticipate a potential or temporary decrease or suspension of benefits like 401(k) matching, PTO, etc., as employers explore potential cost-savings strategies to avoid having to layoff or furlough employees?

Answer: Many employers are considering any practical cost-saving measures to stay afloat during this crisis. However, rather than decreasing or suspending benefits that impact some, I believe we will see a strategic refocus of attention and funds, where available, towards benefits thought to be more flexible and impactful across the board, like HSA’s for example.

That said, I believe COVID-19 will cause a major mind shift in how we think about employee benefits, in line with human-centered design principles, where the focus shifts from the benefits themselves to the employee’s individual financial needs, integrating benefits in a way that best meets their financial security. This includes:

Increased personalization of benefits so each employee can design their own benefits package that best meets their needs, with the help of digital and phone based financial wellness platforms that guide them through the decision-making process.

Increased focus overall on workplace financial wellness as an employee benefit. Employers are actively looking for support in helping their employees through COVID-19 financially and I believe these efforts will quickly morph into a much deeper commitment to financial wellness as a standalone benefit. Our business more than doubled in Q1 2020 vs. Q1 last year and is only gaining momentum as more employers look for proven and cost-effective strategies to help promote their employees’ wellbeing and financial security.

6. Question: According to PayScale, the gender pay gap has improved 7% since 2015. Why do you think the gender gap in financial wellness continued to widen for women in 2019 despite a narrowing of the gender pay gap over the last several years?

Answer: Historically, the gender gap tends to widen in periods of economic expansion and narrow in periods of economic contraction. This has held true throughout the duration of our research. Based on the data, men tend to be more confident and aggressive in their investment strategies during bull markets, which puts them in a better position financially at the time, but also creates more risk in the event of a market downturn. Women, on the other hand, tend to be more conservative, but also more resilient and take a more active role in managing their finances in a down market. Since 2019 was a strong year for the market and economy overall, the gender gap widened. We fully expect it to narrow post-COVID-19. Please note, the narrowing is not necessary a good thing as it represents the “gap” not “absolute” financial wellness. In tough economic times, both men and women tend to regress financially, women just regress at a slower pace.

7. Question: How are employees planning to utilize their COVID-19 economic stimulus checks?

Answer: As part of our ongoing COVID-19 relief efforts, Financial Finesse hosts weekly webcasts aimed at helping employees navigate the day-to-day financial changes and decisions we’re all facing. In order to make these webcasts as relevant as possible, we created a follow-up survey and shared it with the thousands of employees who attended. One of the questions we asked was “What do you plan to do with your stimulus check?” Surprisingly, the majority of respondents that received a payment (47%) plan to put it toward an emergency fund. Only one in five (20%) indicated using it to cover immediate essential expenses. While there is no such thing as good news when it comes to COVID-19, we were excited to see most employees proactively saving their stimulus check versus reactively relying on it to cover immediate essential expenses.

VIDEO: How to Help Your Employees Through the COVID-19 Financial Crisis

March 25, 2020

How To Make Financial And Life Decisions in Uncertain Times

March 19, 2020

If you are a planner like me (full disclosure, I am not a CERTIFIED FINANCIAL PLANNER ™, but a planner in the generic sense), who likes to analyze all of her available options before making a thoughtful and well-informed decision, you may feel frozen from action in the current environment. New developments on public health recommendations, personal health recommendations, and the general state of the economy are being broadcast daily. How can we make the “right” decision when the situation may be entirely different tomorrow?

We all must make daily decisions, and in uncertain times, the importance of those may feel amplified as we try to control the situation as much as possible. To clarify, when I refer to “decisions,” I am referring to both the smaller things in life –Should I still plan a summer vacation? –and the bigger life event-related ones –Should I have another baby? Should I switch careers? These questions can be applied to all decisions, including financial ones.

One option is to freeze all decision-making until things have stabilized. For a lot of decisions, this strategy could work. However, what if you have a time-sensitive decision or an opportunity that may not last long? Below are a few questions to ask yourself as you navigate a decision in an uncertain time:

Do I really need to decide now?

When you are close to a situation, it can feel like you must decide right now. However, for most things in life, that’s not the case. Consider whether waiting to gain some perspective will help you make a better decision, and one that you feel more at peace with. Try to avoid letting fear and panic guide your decision making. Write a date on the calendar to revisit the decision, to hold yourself accountable to deciding and not putting it off indefinitely.

What is the best-case, worst-case, and most likely scenarios for each option? What are the potential upsides and downsides of each scenario?

This is something that I do a lot at work, when making my own decisions or helping a colleague make a decision. But I find that most of us are less likely to do it in our personal lives, and especially around our finances. It can be easy to get emotionally invested in a specific outcome rather than looking at all outcomes. If you’re not sure of the upsides and downsides of a financial decision, call a financial coach to help you identify them!

What is my back-up plan if things go poorly? What does my support system look like?

Contingency planning is critical here, and your support system plays a huge role in what your worst-case scenario looks like. Are you thinking of switching careers, moving across the country, or buying a house right as we head into a recession? Your age, your savings, your income streams, your partner, and your risk tolerance will all impact how the worst-case scenario looks for you.

Every day we make a multitude of choices, and ultimately our lives become the sum of these choices. Do what you can to set yourself and those around you for success, but know that there’s no such thing as a “perfect” decision

Are You Financially Immune From The Next Emergency?

March 17, 2020

The following post is an excerpt from the Financial Finesse Personal Finance FORBES Blog. You can read the original post in its entirety here.

In many ways, emergency planning is the Rodney Dangerfield of financial planning. It gets no respect. The typical advice is to simply stash away enough cash savings to cover 3-6 months of income and then move on to more exciting topics like investing and retirement planning.

However, an event like the coronavirus has shown that merely having emergency savings is not enough. Just like an investment portfolio, a properly diversified “emergency portfolio” requires more than just savings in the bank. Here are the elements you’re going to want to make sure you have before the next big disaster:

1) An emergency kit

No, you don’t need to become a full-on “doomsday prepper.” You just need some basic tools, first aid supplies, and enough food and water to last at least 3 days. You can get checklists from the Department of Homeland Security and the Center for Disease Control. You can then supplement it with supplies for those types of disasters that are most common for your area.

2) Food reserves

If the emergency lasts more than 3 days, you’ll still want to be able to eat. Rather than purchasing specialized “emergency rations,” you can simply bulk up on long-lasting food that you already eat. At the very least, it’s something you know you’ll need and can benefit from even if no emergency ever happens. In fact, you’re likely to save money this way. Simply replace the items as you use them and perhaps add items when they’re on sale.

A food reserve can also be part of your regular emergency fund, thus reducing the amount of savings you need. After all, you can eat it when you’re unemployed too. Sure, you would miss out on the less than 1/10^th of a percent (minus taxes) you’d otherwise be earning with that money in the average savings account. But according to the most recent CPI release, the inflation rate of food at home over the last 12 months ending in January was about 0.7%, so you’d actually be saving a little more than what you likely would have earned keeping that money in the bank.

3) Physical cash

No matter how adequate your emergency supplies are, you never know what you may need to purchase from someone else in an emergency. That’s why they say “cash is king.” Although the financial world refers to bank deposits and money market funds as “cash,” in a true crisis, banks may be closed, ATMs may not be working, and money market funds may not be available if the stock market is suspended (as it was after 9/11). Some preppers like to keep gold coins for this reason, but people may not know how to judge their value in a crisis. Instead, consider keeping at least a few hundred dollars in physical cash (even if it’s under the proverbial mattress).

4) Emergency savings

None of this means you won’t still need some savings in the bank. You can’t exactly use food to replace items damaged in a storm or fire. Nor is credit a good substitute for savings since lines of credit can always be cancelled, which is all the more likely during tough economic times or when you’re unemployed—the two times you’re most likely to need it. For this reason, you may want to use any low-interest (below 4-6%) credit available to you before your cash reserves so you can preserve them as long as possible.

How much do you need in savings? Even so-called “financial gurus” don’t agree. Dave Ramsey suggests a starter emergency fund of about $1k until you’ve paid off all your high-interest debt. Suze Orman recommends having 8 to 12 months’ worth of expenses in savings before paying off debt. What you decide to do may depend on your personal comfort level, the availability of other sources of financial support, and how risky your income is. You can use this calculator to get an idea based on your expenses and how difficult it would be to replace your income.

These savings should be somewhere safe and accessible like an insured bank or credit union account. If you want to maximize your interest, consider a rewards checking account. They can pay over 5% in interest, and many will reimburse your ATM fees as long as you’re willing to bank remotely, use direct deposit and electronic statements, and use your debit card 10-15 times a month.

5) Adequate insurance

No matter how much savings you have, it probably won’t be enough to cover some of life’s biggest financial disasters. That’s why you need adequate health, auto, renter’s or homeowner’s, disability, and life insurance. If you’ve accumulated a lot of assets, you may also want to consider enough umbrella liability and long-term care insurance to “CYA”: cover your assets.

Whether it’s the current threat of a possible pandemic or potential terrorist attacks, natural disasters, or financial crises, many experts fear that our world is only getting more dangerous. No one knows when the next disaster will be. The only question is whether you’ll be ready.

Society of Actuaries – Calculating ROI: Measuring the Benefits of Workplace Financial Wellness

May 23, 2019

As human resources executives and benefit-plan sponsors prepare their 2017 budgets, many will question the value of investing in a workplace financial wellness program. Determining the true value of such a program has proved to be elusive, but recent research from the Financial Finesse Financial Wellness Think Tank has introduced a viable way to forecast the potential return on investment (ROI) of the programs using data collected from actual clients. This model, as shared in a 2016 report,1 provides results that indicate employers can find it beneficial to invest in a highquality financial wellness program.

How to Keep Your Employees’ Finances from Flat Lining & Retain Top Talent

April 13, 2017

Healthcare employees rank the absolute lowest in financial wellness, with below average grades in the areas of financial stress, retirement planning, investing, debt, and money management. Read Financial Finesse’s case study of a Fortune 500 Healthcare Company’s successful financial wellness program to learn how to tackle the unique HR and benefits challenges facing healthcare professionals.

Making the Case for Workplace Financial Wellness

October 19, 2016

The American workplace is constantly changing. At one time, people generally stayed with one employer throughout their entire career and then retired with a gold watch and a big pension until they passed away. Then over the last 25 years, employers increasingly shifted from those traditional defined benefit plans to defined contribution plans which left the control, and the risk, in the hands of employees who were often ill-equipped and unprepared for that responsibility. From 1980 to 2008, the percentage of private employees with a defined benefit pension fell almost in half from 38 percent to 20 percent, while the percentage with only a defined contribution plan rose from 8 percent to 31 percent.

This trend isn’t limited to retirement benefits. More recently, we’ve seen a shift toward consumer-driven health care plans that place more risk and responsibility for healthcare spending on employees as well. According to a Willis Towers Watson/NBGH survey last year, 86 percent of employers were considering offering a consumer-driven health care plan this year, and over a third were planning to make it the only available option.

The workplace is beginning to go through another evolution in which employers become more than just a source of pay and benefits. As employees bear more of the responsibility for their financial wellbeing, employers are increasingly finding it to be in their best interest to help their employees advance their total financial wellbeing. For example, 93 percent of companies surveyed in a 2015 Aon Hewitt report are likely to create or broaden their efforts on financial wellness in a manner that extends beyond retirement decisions. Employees appreciate it too, as 81 percent in a TIAA survey reported that they trust financial information offered by their employer. There are several reasons that help explain this trend:

Greater need for benefits appreciation

It’s a lot easier to understand the value of a pension or a comprehensive medical plan that the employer pays for than a 401(k) or an HSA that the employees may be solely responsible for funding, or at least share responsibility. A financial wellness program can help employees understand, utilize, and more fully appreciate these benefits. In turn, this can help employers recruit and retain talent.

Rising financial stress

A 2016 survey by Bank of America Merrill Lynch revealed an increase in the percentage of Americans reporting financial stress to 60 percent, up from 50 percent in 2013. In fact, our 2016 Financial Stress Research found that one in four employees reported financial stress that was “high,” or “overwhelming” – levels that could be considered unmanageable. According to an AP/AOL health poll, high levels of financial stress are correlated with higher occurrences of headaches, insomnia, high blood pressure, stomach ulcers, muscle tension, and severe anxiety and depression. Those experiencing high levels of stress also experience more relationship and substance abuse issues. There’s a rising awareness among employers that this stress can have a negative impact on a company’s bottom line due to factors like higher health care costs, absenteeism, lost productivity, and on-the-job accidents. For example, our most recent study of one Fortune 100 healthcare company calculated that employer healthcare costs associated with employees who used the company’s financial wellness program actually decreased by 4.5 percent, while the costs associated with employees who never used the program increased by 19.4 percent

Delayed retirement

In addition to suffering greater financial stress, Americans are increasingly delaying their retirement. A 2014 Gallup poll found that the average retirement age rose from 60 to 62. Many employees continue to work because they are underprepared or they don’t know if they are prepared to retire. 69 percent of Boomer employees do not believe or do not know if they have enough money to live comfortably to age 85, according to a Bankers Life Center for a Secure Retirement^® study. This delayed retirement trend may only accelerate with the potential of future cuts in Medicare and Social Security and lower investment returns due to relatively low interest rates and high stock valuations. Employees who would like to retire but delay could cost their employer $10,000 to $50,000 for each year they work past normal retirement age due to higher health care costs and salaries versus younger employees who would have otherwise taken their place. This doesn’t include the cost of lower employee morale/productivity and higher turnover of high performing employees who aren’t advancing.

One of the biggest contributors to delayed retirement is not saving enough. However, financial wellness programs can make a difference by not only educating employees on the need to save more, but also helping them learn the basic money management skills to come up with the money to save. Our 2015 Year in Review Research showed a direct correlation between average 401(k) deferral rates and the number of interactions employees had with their financial wellness program. Those with only one interaction averaged less than a 6 percent deferral rate, while those with 5 or more interactions had an average 11 percent deferral rate, almost twice as much. Our research also shows that repeat users had an 88 percent improvement in the percentage on track for retirement.

Another factor is how well the employees invest the retirement money they save. However, our research found that only 46 percent of male employees and 36 percent of female employees felt confident in their investments. A workplace financial wellness program can help employees understand their investment options and make the right choices for themselves.

Other costs of poor financial wellness

Our recently released ROI Special Report also found a direct relationship between an employee’s financial wellness and their average annual cost to the employer from other factors like absenteeism, garnishments, and payroll taxes. The study found that those with the lowest Financial Wellness Score™ of 0 to 2 cost an average of $198 per employee while those with the highest scores of 9 to 10 actually saved $143 per employee per year. Increasing the median financial wellness score of a 100,000 employee company from a 4-5 would save over $433,000 in decreased garnishment costs, over $682,000 in payroll tax savings from increased usage of flex spending/HSAs, and over $4 million in reduced absenteeism. Increasing the median from a 4 to a 6 would save over $886,000 in garnishments, $1.7 million in flex spending/HSAs, and over $8.5 million in absenteeism.

Employers used to bear the risk and burden of providing for the health and retirement security of their employees. As that burden has shifted onto employees, employers are finding themselves in a new role. The American workplace has become more than just a place to earn money — it’s now a place to learn how to make the best use of that money.

The ROI of Workplace Financial Wellness

October 19, 2016

How much money can a highly effective financial wellness program save your organization? The answer, for most large companies, is well into the millions — and that’s focusing on the costs that are easiest to measure: wage garnishments, absenteeism and utilization of FSAs and HSAs. With additional analysis, companies can also measure the savings from reductions in healthcare costs and delayed retirement. Modeling and survey research can benchmark and measure improvements in employee engagement, productivity, retention and morale. While the most toxic effects of unchecked financial stress, like embezzlement, workplace violence and a culture of negativity, are nearly impossible to calculate, it’s intuitive that reducing financial stress would also reduce those problems.

The Starting Point for Calculating ROI: Financial Finesse’s Predictive Model

The national average financial wellness score is 5, based on Financial Finesse’s 0-10 financial wellness scale which benchmarks each employee’s financial wellness based on an online assessment. A Workforce Financial Wellness Assessment™ aggregates and analyzes this data on the company level. The chart to the left shows the projected costs savings of an incremental shift in the median workforce financial wellness score from 4-6, which has the potential to save a large employer of 50,000 employees approximately $5.6 million a year.

The cost savings illustrated in the above chart are simply a starting point of what is easy to measure — the tip of the iceberg of a much more in-depth analysis that needs to be done to more accurately calculate the true financial impact.

A strong behavioral-based financial wellness program drives results in areas that are much more strategically important to the success of your organization, such as:

Reducing health care costs;

Reducing delayed retirement costs, with the greatest gains here among employees working in highly physically or mentally tasking jobs where a small decline in their desire or capabilities to do the work can put their own well-being or the well-being of others at risk; and

Recruiting, retaining and engaging employees

Healthcare Cost Savings

A 2014 study from the American Psychological Association reports that 64 percent of those surveyed cited money as a significant source of stress, and that Americans are paying for this stress with their health. Financial stress has been attributed to decreased employee productivity, increased absenteeism and increased employer healthcare costs.

Financial wellness programs are correlated with lower healthcare costs. Our own study of a Fortune 100 healthcare company found that employer healthcare costs associated with employees who used the company’s financial wellness program actually decreased by 4.5 percent, while the costs associated with employees who never used the program increased by 19.4 percent. This equated to a cost savings of $271.50 per employee. If a 50,000-life employer experienced the same cost savings by offering a comprehensive workplace financial wellness program, it could save the employer over $13.5 million a year.

POTENTIAL ANNUAL HEALTHCARE COST SAVINGS

$271.50 (net healthcare savings per employee)

X 50,000 (average number of employees)

= $13,575,000

Reducing Costs of Delayed Retirement

Employees today are woefully underprepared for retirement, with only 21 percent indicating they are on track to achieve their income goals in retirement according to recent research from Financial Finesse. As employees progress through the late career cycle, those who are underprepared may have to delay their retirement for financial reasons. This has repercussions throughout the company in terms of increased health and disability costs as well as the velocity of talent development. According to the Transamerica Center for Retirement Studies^®, 65 percent of Baby Boomers either plan to work past age 65 or do not plan to retire at all. For every year an employee who would like to retire delays retirement for financial reasons, the employer faces estimated additional costs between $10,000 and $50,000.

Our research shows that as employee’s overall financial wellness levels increase, so do contributions to retirement plans. Higher contribution rates reduce the likelihood of delayed retirement, since employees are more financially prepared. For younger employees, our research suggests that increases in contribution rates due to improved financial wellness could increase lifetime retirement savings by as much as 12 percent to 28 percent.

Our research also found that employees that engage repeatedly in their employer’s financial wellness program increase their likelihood of being on track for retirement—from 34 percent to 47 percent according to our findings*. For a 50,000-life employer, this 13-point improvement could equate to a $6.5 million annual cost reduction related to delayed retirement.

POTENTIAL COST SAVINGS FOR HELPING EMPLOYEES RETIRE ON TIME

13% (improvement in employees on track to retire)

X 10% (estimated % of workforce nearing retirement)

X $10,000 (estimated annual cost per employee for delayed retirement)

X 50,000 (average number of employees)

= $6,500,000

*Data based on study conducted for Fortune 100 employer using Financial Finesse’s services. Individual company results may vary.

Recruit, Retain, and Engage Top Talent

According to the 2016 Deloitte Millennial Survey, two-thirds of younger employees plan to leave their current job by 2020, with 25 percent saying they plan to leave in less than a year. Turnover costs companies money. Citing the research of W. F. Cascio, the SHRM Foundation’s report, Retaining Talent, indicates that “…direct replacement costs can reach as high as 50 percent to 60 percent of an employee’s annual salary, with total costs associated with turnover ranging from 90 percent to 200 percent of annual salary.” That puts costs anywhere between $45,000 and $100,000 when replacing an employee making $50,000 a year. A 2016 Paychex survey found that approximately 70 percent of employees cited low pay as a reason they have left or would leave a job, and 45 percent said they have or would leave due to a lack of benefits.

In our experience, most employees are dissatisfied with their pay and benefits because they haven’t fully maximized the value of what their company offers. They leave thousands (in some cases tens of thousands) of dollars on the table annually by not taking advantage of free or low-cost benefits such as company matching programs, discounted voluntary benefits, health and wellness benefits, and the small benefits that add up over time like commuter benefits, free parking, tuition reimbursement and others. The money they are foregoing could be the difference between sinking deeper into debt and proactively saving towards key financial goals.

Consider a scenario where a 50,000-life company with a 10 percent turnover rate institutes a comprehensive workforce financial wellness program. If that program resulted in 50 fewer employees leaving the company (i.e., a 1 percent reduction in the turnover rate), it could equate to over $2.2 million in annual savings:

POTENTIAL COST SAVINGS BY REDUCING TURNOVER

1% (projected reduction in employee turnover)

X 10% (turnover rate of employees)

X $45,000 (estimated net cost to replace employee)

X 50,000 (average number of employees)

= $2,250,000

Measuring Your Organization’s ROI

Using Financial Finesse’s predictive model, companies can set research-based benchmarks for their financial wellness program, customized to their employee demographics and financial wellness levels. This starts with a Workforce Financial Wellness Assessment™ to determine the median levels of employee financial wellness and financial stress, followed by implementing optimal outreach based on your workforce demographics. Improving median financial wellness is a process that takes time – there aren’t instant fixes that happen in one quarter. Companies can integrate data based on key measurement variables and benchmark results on a year-over-year basis. For the hypothetical 50,000-employee company discussed here who implements a comprehensive workplace financial wellness program according to industry best practices, pulling all those results together could result in total cost savings of nearly $28 million.

Garnishments	$ 443,413
FSA/HSA contributions payroll taxes	$ 887,229
Absenteeism	$ 4,264,396
Health care	$ 13,575,000
Delayed retirement	$ 6,500,000
Turnover	$ 2,250,000
Estimated Total	$ 27,920,038

Does Financial Wellness At Work Really Work?

January 28, 2016

What exactly is an unbiased workplace financial wellness program? Companies interested in providing one need to understand the essential components of this new workplace benefit. Behavioral finance expert Dr. Scott Spann explains how using the right success metrics, services, and customization can result in both financially healthier employees and an increase to the companies’ bottom line.

The Unlikely Place Where Women Are Finding Relief from Financial Stress

January 21, 2016

Can you guess which employees are the most financially stressed? Research shows that 55% of lower to middle income mothers have “high” or “overwhelming” levels of financial stress. Thankfully, many of them are turning to their workplace financial wellness programs to help reduce their level of financial stress. Learn more about how these valuable initiatives are helping female employees thrive.

Financial Wellness – The New Employee Benefit That’s Changing Lives #MyIndustry

March 23, 2015

Financial wellness programs have the power to revolutionize how millions of Americans manage their finances. What is financial wellness? How does it work? Financial Finesse CEO Liz Davidson explains the emerging financial wellness industry, and how these programs are helping companies save millions in healthcare costs while reducing financial stress and anxiety for employees.